MBA: Mortgage Credit Availability was Never Excessive During the Recent Housing Boom

Although mortgage credit availability decreased in September (the MBA headline below), the most important point is mortgage credit availability was never excessive during the boom. Here is the expanded series from the MBA of mortgage credit availability that includes the bubble years (2004 - 2006).

The Total MCAI has an expanded historical series that gives perspective on credit availability going back approximately 10-years (expanded historical series does not include Conventional, Government, Conforming, or Jumbo MCAI). The expanded historical series covers 2004 through 2010, and was created to provide historical context to the current series by showing how credit availability has changed over the last 10 years – including the housing crisis and ensuing recession. Data prior to March 31, 2011, was generated using less frequent and less complete data measured at 6-month intervals and interpolated in the months between for charting purposes.

Look at that huge increase in mortgage credit availability back in the 2004 - 2006 period (remember “fog a mirror, get a loan”, NINJA loans: No Income, No Job or Assets?). In the recent boom, lending was reasonably solid, and most homeowners have substantial equity in their homes. Although I expect an increase in foreclosures from record low levels, there will not be a huge wave of foreclosures as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.

Here is the article from the MBA: Mortgage Credit Availability Decreased in September

Mortgage credit availability decreased in September according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) that analyzes data from ICE Mortgage Technology.

The MCAI fell by 5.4 percent to 102.5 in September. A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. The index was benchmarked to 100 in March 2012. The Conventional MCAI decreased 4.9 percent, while the Government MCAI decreased by 5.7 percent. Of the component indices of the Conventional MCAI, the Jumbo MCAI decreased by 5.8 percent, and the Conforming MCAI fell by 3.6 percent.

"Credit availability fell to the lowest level since March 2013 – the seventh consecutive month of tightening,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting.

This is a key reason why we shouldn’t compare this housing cycle to the housing bubble, see:

Housing: Don't Compare the Current Housing Boom to the Bubble and Bust

In my discussion last week with Fortune’s Lance Lambert, I referenced Tolstoy’s quote about “every unhappy family is unhappy in its own way” and suggested every housing bust is different in its own way. However, I do think the closest prior period was back in 1978 to 1982 with the Fed raising rates, strong demographics and soaring mortgage rates.