Housing Finance at a Glance: Monthly Chartbooks
The June 2020 edition of At A Glance, the Housing Finance Policy Center’s reference guide for mortgage and housing market data, includes updated figures describing first lien origination volume, cash-out refinances, national home price appreciation and credit availability for purchase loans.
Credit Box Narrows Slightly for Agency Refinance Mortgages
The characteristics of GSE and Ginne Mae or “agency” mortgages originated in January and April suggest that the mortgage credit box tightened in recent months, largely in the FICO score dimension, and specifically across refinance mortgages. Debt-to-income (DTI) and combined loan-to-value ratio (LTV) characteristics appear mostly unchanged. But Mortgage Bankers Association data suggest that conditions continued tightening in May, particularly on GSE mortgages, suggesting that the April results may under-report the extent of tightening that has occurred in GSE mortgages.
Tighter lending standards on agency refinance mortgages partly reflect a still high unemployment rate, which raises the risk that some homeowners may not make their mortgage payment. Moreover, if the borrower requests forbearance prior to the sale of the loan to the GSEs or FHA, the lender must sell the loan at a penalty. And forborne mortgages have advancing requirements, imposing a further burden on the servicer.
The strong demand for refinance applications –which has fallen a bit from an earlier peak – is also contributing to tighter standards as lenders seek to manage their capacity. In response to strong demand for refinance mortgages, lenders typically tighten standards to manage their capacity. As a result, some homeowners’ ability to benefit from historically low mortgage rates and continued house price appreciation is reduced due to tighter standards on refinance mortgages.
MBA’s Mortgage Credit Availability Index (MCAI) through April suggests that lending standards on non-agency jumbo mortgages tightened more than agency mortgages. Over the month of April, the Conforming MCAI fell 7.1 percent and the Government MCAI fell 9.5 percent while the jumbo MCAI declined 22.6 percent. This difference likely reflects actions taken by the Federal Reserve in March to purchase agency mortgage-backed securities in unlimited amounts. And the May MCAI indicated that credit availability continued to tighten, however, the decline in Jumbo and Government mortgage credit availability slowed dramatically while the decrease in Conforming mortgage availability continued apace (4.4 and 0.8 percent v. 6.9 percent respectively).
These results suggest that the GSE mortgage credit box is tighter than what the mortgage data to date communicates.
July 2019 (watch the July 29 chartbook call with guest Richard Green)
April 2019 (watch the April 29 chartbook call with guest Dave Stevens)
January 2019 (watch the January 30 chartbook call with guest Dave Stevens)