DSNews delivers stories, ideas, links, companies, people, events, and videos impacting the mortgage default servicing industry.
Issue link: http://digital.dsnews.com/i/1532176
MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 42 February 2025 J O U R N A L THE FACTORS DRIVING MORTGAGE AVAILABILITY T he Mortgage Credit Availability Index (MCAI), a survey from the Mortgage Bankers Associ- ation (MBA) that examines data from ICE Mortgage Technology, indicates that mortgage credit availability rose in December. In December, the MCAI increased by 0.7% to 96.6. While an increase in the index signifies loosening credit, a decrease in the MCAI suggests tight- ening lending rules. In March 2012, the index was benchmarked at 100. The Government MCAI did not change; however, the Conventional MCAI rose by 1.3%. The Conforming MCAI decreased by 0.7%, while the Jumbo MCAI rose by 2.3% among the Conven- tional MCAI's component indices. "Credit availability increased slightly in December, driven by more offerings for ARMs and cash-out refi- nances that are primarily for borrowers with better credit," said Joel Kan, MBA's VP and Deputy Chief Economist. "These factors led to a slight rebound in conventional credit compared to the previous month. Additionally, the jum- bo index rose to its highest level since August 2024." The MCAI rose by 0.7% to 96.6 in December. The Conventional MCAI increased 1.3%, while the Government MCAI remained unchanged. Of the component indices of the Conventional MCAI, the Jumbo MCAI increased by 2.3%, and the Conforming MCAI fell by 0.7%. REPORT: CRE LENDERS FEELING STRESS BUT WEATHERING THE STORM M any commercial real estate (CRE) borrowers are feeling challenged these days, due to changes in post-pandemic behavior and a larger debt service caused by higher interest rates. While these may lead to higher defaults, S&P Global Market Intelligence's latest report, Commercial Real Estate Outlook: Weathering the Storm reports that the stress will be different across various asset classes and could take longer to play out than many think. Commercial Real Estate Outlook: Weathering the Storm examines how insurers, banks, and regulators are dealing with these potential stresses in the CRE market, including recent investment activity from life insur- ers and expectations for future loss content banks will record from the CRE segment. It also spotlights how publicly traded real estate investment trusts (REITs), which trade daily, can offer some insight into market conditions. "Commercial real estate borrowers' mettle will be tested over the coming year as they seek to refinance loans coming due," said Nathan Stovall, Director of Financial Institutions Research at S&P Global Market Intelligence. "Many borrowers will find credit less available or at least significantly more expensive, leading to more defaults, particularly in the office segment, but not all CRE loans face the same fate. Any pain should not be great enough to spur deleveraging in the financial system and threaten the U.S. economy. Key Takeaways • Banks with elevated CRE exposure have faced scrutiny from regulators and investors: Borrowers seeking to refinance maturing credits may find it more difficult to access credit or might encounter a significant- ly higher debt service due to the increase in interest rates, which will be ref lected in banks' CRE books. • Close to $1 trillion of CRE mortgag- es are maturing in 2024. Approx- imately $950 billion, in fact. This analysis of U.S. property records found that those mortgages were maturing with rates nearly 200 ba- sis points below similar mortgages originated this year. • Office REITs still trade at vast dis- counts to their estimated net asset value estimates. The good news is valuations have improved from 2023's low point. • Life insurers' holdings of mortgage loans have continued hitting record highs in 2024, even despite asset quality concerns. "Commercial real estate borrowers' mettle will be tested over the coming year as they seek to refinance loans coming due." —Nathan Stovall, Director of Financial Institutions Research, S&P Global Market Intelligence