Through consecutive months of gains in the Mortgage Credit Availability Index, loosened credit standards have emerged. Three main factors are responsible for this rise: the 97% LTV product from Freddie Mac, an extension of the jumbo loan program, and growth in the amount of cash-out refinance offerings.
This credit availability along with low interest rates and a stronger job market should lead to more active home purchase activity in the upcoming months. All of this and an increase in home equity could also lead to an open market for purchase originators.
What else does this mean? Well, via the government, an incremental increase in the growth of credit availability should be next. The government plays a huge role in the actions of the FHFA, GSEs, HUD, and FHA, while there are some vital steps that they’re making to ensure a safe expansion of mortgage credit. The actions the government are taking are the FHFA’s G-Fee decision, a flatter LLPA grid, lightened Private Mortgage Insurance Eligibility Requirements by the FHFA, simplification of of FHA’s lender liability, and an extension of HARP.
With important pending decisions, policies and the involvement of the government, we should be looking at a prudent growth of credit availability.