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MortgagePoint September 2023

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Page 77 of 99

MortgagePoint ยป Your Trusted Source for Mortgage Banking and Servicing News 76 J O U R N A L August 2023 Lending/Originations MORTGAGE CREDIT AVAILABILITY FALLS TO LOWEST LEVEL IN A DECADE M ortgage credit availability de- creased in July, according to the Mortgage Credit Availability Index (MCAI), a report from the Mortgage Bankers Association (MBA) that analyzes data from ICE Mortgage Technology. "Mortgage credit availability declined to its lowest level since 2013, as lenders pulled back on underutilized loan programs and as liquidity concerns remain for some jumbo lenders," said Joel Kan, MBA's VP and Dep- uty Chief Economist. "Declining origination volumes have led to lower profitability for many lenders, resulting in narrower loan product offerings to reduce operational costs. " The MCAI fell by 0.3% to 96.3 in July. A decline in the MCAI indicates that lending standards are tightening, while increases in the Index are indicative of loosening credit. The Index (see the MCAI Chart on page 77) was benchmarked to 100 in March 2012. The Conventional MCAI decreased 0.5%, while the Government MCAI decreased by 0.1%. Of the component indices of the Conven- tional MCAI, the Jumbo MCAI decreased by 0.8%, and the Conforming MCAI rose by 0.2%. "One key driver of this month's decline was a drop in cash-out refinance loan pro- grams," Kan said. "The 30-year fixed mort- gage rate averaged 6.94% in July, more than a percentage point higher than July 2022, and this has significantly discouraged cash-out refinance activity, as borrowers turn to home equity and consumer loans instead. The jumbo index fell for the third straight month, as jumbo lenders further reduce the number of available loan programs." MORTGAGE RATE INCREASE SLOWS HELOC ACTIVITY IN FIRST HALF OF 2023 A ccording to Freddie Mac data, the average 30-year fixed-rate mortgage (FRM) has reached its highest level in 21 years. A new CoreLogic release revealed the increase will not only further erode U.S. home affordability, but also discourage homeowners from tapping loans against their accrued equity. While home equity lines of credit (HELOCs) and home equity loans gained popularity as owners leveraged accumulated equity in 2022, the appeal has dampened in 2023. Demand for HELOCs is typically linked to current interest rates, which have been steadily rising over the past few years. Despite interest rate hikes, HELOC activ- ity surged in 2022. Escalating mortgage rates compared with those seen in 2021 significant- ly curtailed refinancing opportunities, and resulted in an uptick in HELOC activity. The HELOC landscape has changed dramatically so far in 2023, as elevated interest rates discourage homeowners from pursuing such loans. Additionally, the average rates on 30-year, FRMs surged by nearly 2 percentage points during the first half of 2023, averaging 6.44% compared with the same period in 2022. Annual U.S. HELOC Numbers Drop Substantially in the First Half of 2023 HELOC activity peaked in 2022, marking the highest level since the first half of 2007, but this number dropped in the first half of 2023. During that time, lenders initiated over 645,000 new HELOCs, amounting to almost $98 billion. Despite a decrease of 26% in HELOC counts and a 32% reduction in amounts on a year-over-year basis in 2023, it's worth noting that the HELOC market is keeping pace with its pre-pandemic level. HELOC Trends by State: California, Florida, and North Carolina Lead in 2023 The following graph shows a comparative analysis of approved HELOC amounts (by

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