The Credit Box Shows Early Signs of Loosening: Evidence from the Latest HCAI Update

Brief

The Credit Box Shows Early Signs of Loosening: Evidence from the Latest HCAI Update

Abstract

The Housing Finance Policy Center’s latest measure of the availability of mortgage credit, the Housing Credit Availability Index (HCAI), reveals that credit availability started to slowly increase from Q3 2013 to Q1 2015, after years of post-crisis credit tightening, moving from 4.6 percent of purchase loans that are likely to default to 5.7 percent. This loosening was sparked by GSE-backed and FHA, VA and RD loans. Significant space still remains to safely expand the credit box, however. If the current default risk were doubled, it would still be well within the pre-crisis standard of 12.5 percent in 2001–2003.

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