I’ve been saying for almost a year now that higher rates would lead to more bank lending. It is happening……
From the MBA
Mortgage credit availability increased slightly in February, according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA), which analyzes data from the AllRegs® Market Clarity® product.
“For the third month in a row, mortgage lenders and investors slightly expanded credit offerings in February on net, as a result of offsetting factors,” said Mike Fratantoni, MBA’s Chief Economist. “There was significant pull-back among 3/1 ARM programs. The recently implemented QM/ATR sections of the new CFPB regulations stipulate that ARM loans must qualify at the highest allowable rate for the first five years of the loan. Many investors have discontinued loans whose interest rate adjusts after only 3 year (also known as 3/1 ARMS).
“While there was significant pull-back on these 3/1 programs, lenders and investors added several new 5+ year ARM programs, including those for jumbo loans, to their repertoire, resulting in a net increase to the MCAI.”
The MCAI increased 0.44 percent from 113.0 in January to 113.5 in February. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of a loosening of credit. The index was benchmarked to 100 in March 2012. If it had been tracked in 2007, it would have been at a level of roughly 800, indicating the credit was much more available at that time.
Now, before the housing bears out there start getting all hysterical about the rise and start yelling “subprime” … “bubble” … “loose lending standards” … let’s take a look at the chart below and compare where we are now to 2006….