Mortgage credit availability tightened in May

Good morning. This is Mortgage Nuggets, the newsletter you lean on for fresh mortgage news. Today’s newsletter is 725 words, a 3.5-minute read.

1. Inflation is falling

The inflation rate fell in May to the slowest rate in over two years, but core inflation remained an issue as the Federal Reserve opened its two-day meeting yesterday.

According to the latest U.S. Bureau of Labor Statistics report, the consumer price index (CPI) rose just 0.1% in May on a seasonally adjusted basis, down from 0.4% in April. In addition, over the past 12 months, the CPI all-items index rose 4% before seasonal adjustment, down from 4.9% in April and below the 4.1% increase expected by analysts.

Although the current annual increase of 4% is the lowest since March 2021, it still exceeds the Fed's inflation target of 2%. Nevertheless, Federal Reserve policymakers are poised to pause their hiking cycle for the first time in 15 months, in a rate decision that will land at 2:00 p.m. in New York.

2. Guild launches 1% down payment program

Guild has launched a 1% down payment advantage program to attract more homebuyers amidst high mortgage rates. Customers can buy a home with a minimum down payment of 1% of the purchase price. Guild will also cover 1% of the borrower’s interest rate for the first year with a lender-paid temporary buydown.

Typically, a 3% down payment is required for conventional loans, but Guild will cover 2% of the required 3% minimum down payment in the form of a non-repayable grant, with a maximum grant amount of $5,000.

Eligibility criteria include a minimum credit score of 620 and a 95 to 97% loan-to-value first mortgage, and the program is only for first-time and repeat buyers of single-family homes whose income is 80% or less than the area median income. Qualified borrowers can also use Guild’s payment protection program to refinance with no lender fees if rates drop.

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3. Availability of mortgage credit tightened in May

Mortgage credit availability declined in May due to a challenging mortgage landscape marked by lender consolidation, high rates, and limited inventory.

According to the MBA, the Mortgage Credit Availability Index (MCAI) fell by 3.1% to 96.5, indicating tightening lending standards. The decrease in availability, the third consecutive monthly fall, brings the MCAI to its lowest point since January 2013.

The Conventional MCAI decreased by 2.3%, and the Government MCAI, which includes FHA, VA, and USDA loan programs, fell by 3.8%. The Jumbo MCAI and the Conforming MCAI, two sub-indices of the conventional index, fell by 1.5% and 3.9% respectively.

4. More Nuggets

🏡 Renters are about to get the upper hand. New-lease rents are poised to fall annually for only the second time since the 2008 financial crisis. (WSJ)

💸 10 cities where home prices are dropping the fastest. (Realtor)

✍️ Comerica Bank has decided to exit the mortgage warehouse business following disruptions in the banking sector that led to substantial deposit outflows. (Reuters)

🔒 In May, rate locks increased 14% overall on an MoM basis, with purchase locks up almost 15%, cash-out refinances rising 7%, and rate/term refinance locks climbing 13%. (NMP)

5. PACE loans may qualify for Homeowner Assistance Fund money

Borrowers struggling with Property Assessed Clean Energy loan payments might qualify for help from the Homeowner Assistance Fund, according to a recent Treasury report.

The report issued Monday added "payment assistance or principal reduction" for PACE loans to the list of qualified expenses for the fund that states distributing the money could authorize under certain circumstances.

The money should only be used when "such expenditures would promote housing stability and prevent foreclosures or homeowner displacement," in line with the fund's broader purpose to ease the transition away from pandemic-related housing relief.

☀️ See you on Friday!

Coming up… We’ve got MBA Mortgage Applications at 7:00 am, followed by that all-important FOMC rate decision at 2:00 pm, which will be followed by a speech by Powell at 2:30 p.m.

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