The Mortgage Bankers Association reported that credit in August is the tightest in more than six years. This is the result of the concern over a weak economy prompted by the lenders’ decision to tighten up their lending standards.
The Mortgage Credit Availability Index published by the Mortgage Bankers Association fell to 120.9. This is a 4.7% drop and it’s also the lowest level since March 2014.
This is a dramatic and precipitous drop from the highs of the index, which peaked above 190 back in September of 2019.
In some ways, the concern of the lenders points to the uncertainty that the pandemic has caused, especially due to the high unemployment rates and the number of business disruptions that have resulted in bankruptcies and closures nationwide.
There is some good news on the horizon: the decision to tighten credit should potentially lower the probability of a significant collapse in the real estate market as was seen back in 2006 to 2008, when the real estate market crashed and did not recover for at least another 10 years.
The constriction of available credit came in both the conventional and government segments of the market.
According to the report, loans backed by Fannie Mae and Freddie Mac fell 8.6% to the lowest level dating back to 2011. The jumbo and MCAI high balance loans also fell proportionately by 8.9%.
Federal Housing Administration, Veterans Administration and US Department of Agriculture loans fell by only 1.4%, according to the Mortgage Bankers Association.
The uncertainty stems from the concern over the job market and number of mortgages in forbearance.
Still, even with the tighter standards, rate charged on mortgages recently hit an all-time record low to under 3% on both the 30-year fixed and the 15-year fixed mortgage.
The Mortgage Bankers Association also projects that the refinance market will hit its highest level since 2003 at $1.7 trillion.
If you have any questions about this information or title insurance, please contact Ralph Aponte: 732.914.1400.
Counsellors Title Agency, www.counsellorstitle.net, founded in 1996, is one of New Jersey’s most respected title agencies, serving all 21 New Jersey counties with title insurance, clearing title, escrow, tidelands searches, and closing and settlement services for commercial or industrial properties, waterfront properties and marinas, condominiums, townhouses or residential single family homes. Counsellors Title also features its own Attorney Settlement Assistance Program™ [ASAP], which is an individual resource customized to fit the needs specifically of real estate attorneys, including, Documentation, Preparation, Disbursement of Funds, Attendance at Closing, HUD Preparation or Post-Closing Matters.
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