Mortgage lenders dropped some riskier loans in March

For the second time in the past three months, mortgage lenders cut back on their credit offerings, reducing higher risk programs as interest rates rose, the Mortgage Bankers Association found.

The association’s Mortgage Credit Availability Index fell to 125.1 in March, down 0.7% from February’s 126, as the number of programs with higher loan-to-value ratios and lower credit scores dropped. The MCAI forMarch 2021 was 125.4.

“Credit availability has gradually trended higher since mid-2021 but remains around 30% tighter than it was in early 2020,” Joel Kan, the MBA’s associate vice president of economic and industry forecasting, said in a press release. “There were also mixed trends for the various loan categories, as conventional loan credit availability increased for the second month in a row, while government credit supply decreased to its tightest level since February 2014.”

In February 2020, the MCAI was at 181.3. When COVID-related shutdowns began affecting the U.S. economy the following month, the index fell to 152.1 and inApril 2020 it dropped again to 133.5. This past June the MCAI nearly matched its pandemic low just above 118.before rising slightly and plateauing near its current level.

March’s government credit availability index, which has been in decline since peaking in early 2017, fell by 1.6% compared with February.

Lenders offered more jumbo mortgage credit for the 10th time in the past 12 months. The availability of larger loans made above conforming limits rose by 1.5% compared with February, but was still 40% below its pre-pandemic level.

Jumbo loans are a part of the conventional index, which rose by 0.3% on a month-to-month basis even though the conforming portion dropped by 1.9%. Since the start of 2022,the conforming loan limit for single-family homes in most of the country has been $647,200.

The average purchase-mortgage balance for the week ended April 1 was $452,600, up from $401,700 at the start of this year, according to the most recentloan application survey data from the MBA.