U.S. Home-Loan Credit Easing, Mortgage Bankers Say

Mortgage availability in the U.S. has eased, returning to 2011 levels, as home prices recover, according to a new index from the Mortgage Bankers Association and AllRegs.

The Mortgage Credit Availability Index -- calculated based on criteria including credit scores, loan type and loan-to-value ratios from 85 lenders and investors -- rose 7.2 percent in May from a year earlier. Mortgage availability was about eight times greater during the height of the housing boom in 2006 and 2007, when lenders offered loans to borrowers with no down payments and unverified incomes, the Washington-based bankers group said.

Lenders are easing underwriting standards as rising home prices reduce the risk of making new loans, said Michael Fratantoni, vice president of research and economics for the the Mortgage Bankers Association. The S&P/Case-Shiller index of home values in 20 cities climbed 12.1 percent in the year through April, the most since March 2006, a report showed today.

“Credit availability is still quite tight, but we have seen some modest loosening over the past year,” Fratantoni said. “We can see that both as more lenders being willing to extend credit and the terms of that credit loosened slightly.”

A surge in loans under the government’s Home Affordable Refinance Program is helping to drive up the index, Fratantoni said. The program, known as HARP, allows borrowers who owe more than their homes are worth to cut payments by refinancing at lower interest rates. Lenders are also easing requirements for jumbo mortgages for more-expensive home purchases, he said.

The index, which will be released during the second week of each month, measures the supply of credit available and not the volume of lending. It takes into account credit scores and documentation requirements, whether the interest rate is fixed or adjustable, and whether the mortgage is to be used for purchase of a primary or secondary home or for refinancing.

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