Lenders continue to eliminate underutilized loan programs

Mortgage credit availability has hit its lowest level in over nine years, according to the Mortgage Bankers Association.

MBA’s Mortgage Credit Availability Index (MCAI) – benchmarked to 100 in March 2012 – fell to 102.5 in September, down 5.4% from August and the seventh consecutive month of decline in credit supply. The downturn indicates a tightening in lending standards due to an economic slowdown.

“With the likelihood of a weakening economy, which would lead to an increase in delinquencies, there was a smaller appetite for lower credit score and high LTV loan programs, along with a reduction in government streamline refinance programs,” said Joel Kan, associate vice president of economic and industry forecasting at MBA. “As mortgage rates have more than doubled over the past year, resulting in a drop in refinance activity, lenders have worked to reduce excess capacity and costs by eliminating underutilized loan programs.”