Mortgage credit availability drops to six-month low

The pullback was concentrated in the government segment. The Government MCAI fell 4.6%, reflecting a significant retreat from FHA and VA streamline refinance programs, particularly those serving high loan-to-value (LTV) and low credit score borrowers.

The Conventional MCAI also slipped, down 0.1%, while the Conforming MCAI fell 2.2%.

“A contraction in government loan programs accounted for a significant share of the June decrease, as lenders pulled back on FHA and VA streamline refinance loan programs, particularly those for high LTV and low credit score borrowers. The jumbo index increased slightly, supported by new non-QM programs, which is consistent with other market data showing a larger non-QM share of originations,” said Joel Kan, CMB, vice president and deputy chief economist at the MBA.

Government programs bear the brunt

The scale of the government-side retreat is notable. While the MCAI’s overall decline of 2.0% may appear incremental, the Government MCAI’s 4.6% drop signals a more pronounced shift in lender risk appetite, one driven partly by rising delinquency rates and a softening labor market.

Lenders appear to be recalibrating their exposure to borrowers at the margins of eligibility, pulling back streamline options that have historically offered one of the most accessible paths to refinancing for FHA and VA borrowers.