Lenders are courting self-employed borrowers again

Mortgage credit availability increased for the third consecutive month in September, but is still 30% below the pre-pandemic level, according to a report released Tuesday by the Mortgage Bankers Association (MBA). Much of the growth in credit availability has come from loans that cater to self-employed borrowers, who were left in the cold by most lenders during the pandemic.

The MBA Mortgage Credit Availability Index overall rose by 1.5% to 125.6 in September, the highest level since May. The index benchmarks to 100 in March 2012; a higher number portends more mortgage credit availability.

According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, despite elevated rates of home-price appreciation, lenders are offering a wider range of loans to accommodate qualified buyers.

“But, even with increases in seven out of nine months thus far in 2021, total credit availability is still around 30% less than it was in February 2020,” he added.

The Conventional MCAI increased 4.5%, while the Government MCAI declined 0.7%. Of the component indices of the conventional index, the jumbo MCAI increased by 5.8%, the highest level since March 2020, and the conforming MCAI rose by 2.6%.

“Jumbo credit availability increased with more loan programs for non-QM jumbos and loans catering to self-employed borrowers or those with non-traditional sources of income,” said Kan.

Kan added that the conforming index indicated a greater supply of loans for cash-out refinances, investor properties, and adjustable-rate mortgages (ARMs).

“Even as mortgage rates continue to rise, cash-out refinances remain an option for borrowers who have sufficient home equity and need additional cash.” 

According to the Freddie Mac’s latest PMMS survey, the average 30-year-fixed mortgage rate slipped back down to 2.99% for the week ending Oct. 7. The week before, rates had made it above the 3% mark for the first time since June.