Mortgage credit availability reverses two-month downward trend in October

The Mortgage Bankers Association's Mortgage Credit Availability Index climbed by 0.7 percent to 111.5 last month—its first gain since July.

While Ellie Mae's Jonathan Corr notes that the latest MBA figures reinforce that there has been a "steady loosening [of mortgage credit] in an incremental way since the beginning of the year," it's important to note that the index hit 800 in 2007. Lending soared to that level because banks were not properly using loan management software and other risk assessment tools as they extended lines of credit to high-risk borrowers.

CNBC opined that the loosening of credit standards may only impact "the most creditworthy borrowers," while those with lower credit scores will still face significant hurdles before being approved for mortgages. In time, lenders may continue to make affordable mortgages more available to borrowers, while still remaining more risk averse than they were prior to the bursting of the housing bubble.

"The origination volumes are starting to lower, so [banks say] let's start easing up a little bit, take a little bit more risk and help some folks get some mortgages done," TransUnion's Tim Martin told CNBC.

At the same time, as a result of increased credit and an environment that is more conducive to buying, homeowners are increasingly turning away from refinancing options—those figures have plunged by 50 percent in the last year.

Developing a measured approach to risk management is always a difficult balance for lenders, but as the pendulum swings back toward less stringent lending standards, banks need tools to control whatever inclination they might have to return to the cavalier lending standards in place prior to the recession.

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