Mortgage credit availability fell in June to its lowest level since December, the Mortgage Bankers Association (MBA) said Tuesday, amid a pullback in government-insured refinance programs.
The MBA’s Mortgage Credit Availability Index (MCAI), which tracks changes in credit underwriting conditions across the mortgage market, declined 2% to land at 105.8 last month. The index had held steady in May following a 0.4% slide in April.
“A contraction in government loan programs accounted for a significant share of the June decrease,” noted Joel Kan, deputy chief economist at the MBA, in commentary accompanying the June figures.
The MCAI represents an aggregate measure of consumer access to mortgage financing. It is calculated using variables related to eligibility, including credit scores and loan-to-value ratios, as well as the variety of loan programs and structures actively being offered by lenders.
A decline in the MCAI, which analyzes data from ICE Mortgage Technology, indicates tighter lending conditions, while an increase in the index reflects looser lending standards.
Federal housing regulators, responding to an executive order signed by President Donald Trump in March, have begun to solicit public input on ways to expand mortgage credit access, with the Consumer Financial Protection Bureau announcing last week it was specifically reviewing regulations related to mortgage disclosure laws.
Kan said lenders last month pulled back on streamlined refinance loan programs insured by the Federal Housing Administration (FHA) and Department of Veterans Affairs — particularly for borrowers with high loan-to-value ratios and those with low credit scores, who typically represent riskier mortgage collateral.
The conventional component index, which tracks credit access for loans that meet Fannie Mae and Freddie Mac underwriting guidelines, declined 0.1% in June after rising 0.2% during May. The broader government component index plunged 4.6% over the month after being unchanged in May.
Within the conventional index, credit availability for jumbo mortgages with balances that surpass conforming loan limits rose 0.6%, while the conforming index fell 2.2%. The contraction in agency loan programs satisfying Fannie, Freddie and government lending guidelines coincided with continued growth in non-qualified mortgage (non-QM) options.
Overall mortgage rate-lock volumes increased 10% from May and 15% from a year ago in June, according to Optimal Blue data. Non-QM loans accounted for about one-fifth of production as Fannie and Freddie lock shares remained under 50% of total volumes for the third consecutive month.
“The jumbo index increased slightly, supported by new non-QM programs,” added Kan, which he described as “consistent” with data showing a larger share of non-QM production in June.
Mortgage rates have remained around 6.5% or higher since the middle of May, according to MBA data. The elevated rate environment has weakened mortgage affordability as investors navigate a range of uncertainties raising long-term financing costs, from inflationary pressures of the Iran war to widening federal spending deficits and regime change at the Federal Reserve.