Let's Connect!
JACQUELYN DUKE, REALTOR®
  • Home
  • About
    • Meet the Team
    • Testimonials
  • Buyers
    • Get Your FREE Guide "Buying a Home"!
    • FREE First Time Home Buyer Guide AVAILABLE HERE!
    • Property Search
    • Featured Listings
    • Let Us Find What You Are Looking For
    • Get Pre-Qualified!
    • Affordable Homeownership Resources
  • Sellers
    • Staging That Sells
    • Photography That Sells
    • Video That Sells
    • Marketing That Sells
    • Get Your FREE Guide "Selling Your House"!
  • Investors
  • Renters
  • Resources
    • About Central Iowa
    • Utilities Information
    • Local Vendors & Contractors
    • Affordable Homeownership Resources
    • Real Estate News
  • Blog
  • Contact
  • Privacy Policy
  • Home
  • About
    • Meet the Team
    • Testimonials
  • Buyers
    • Get Your FREE Guide "Buying a Home"!
    • FREE First Time Home Buyer Guide AVAILABLE HERE!
    • Property Search
    • Featured Listings
    • Let Us Find What You Are Looking For
    • Get Pre-Qualified!
    • Affordable Homeownership Resources
  • Sellers
    • Staging That Sells
    • Photography That Sells
    • Video That Sells
    • Marketing That Sells
    • Get Your FREE Guide "Selling Your House"!
  • Investors
  • Renters
  • Resources
    • About Central Iowa
    • Utilities Information
    • Local Vendors & Contractors
    • Affordable Homeownership Resources
    • Real Estate News
  • Blog
  • Contact
  • Privacy Policy

buying and selling doesn't have to be hard.

Lending Standards Are Not Like They Were Leading Up to the Crash

7/28/2023

0 Comments

 
Picture
Lending Standards Are Not Like They Were Leading Up to the Crash


You might be worried we’re heading for a housing crash, but there are many reasons why this housing market isn’t like the one we saw in 2008. One of which is how lending standards are different today. Here’s a look at the data to help prove it. 
Every month, the Mortgage Bankers Association (MBA) releases the Mortgage Credit Availability Index (MCAI). According to their website:
“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is . . . a summary measure which indicates the availability of mortgage credit at a point in time.”Basically, the index determines how easy it is to get a mortgage. Take a look at the graph below of the MCAI since they started keeping track of this data in 2004. It shows how lending standards have changed over time. It works like this: 
  • When lending standards are less strict, it’s easier to get a mortgage, and the index (the green line in the graph) is higher.
  • When lending standards are stricter, it’s harder to get a mortgage, and the line representing the index is lower.


In 2004, the index was around 400. But, by 2006, it had gone up to over 850. Today, the story is quite different. Since the crash, the index went down because lending standards got tighter, so today it’s harder to get a mortgage.
Loose Lending Standards Contributed to the Housing BubbleOne of the main factors that contributed to the housing bubble was that lending standards were a lot less strict back then. Realtor.com explains it like this: 
“In the early 2000s, it wasn’t exactly hard to snag a home mortgage. . . . plenty of mortgages were doled out to people who lied about their incomes and employment, and couldn’t actually afford homeownership.” The tall peak in the graph above indicates that leading up to the housing crisis, it was much easier to get credit, and the requirements for getting a loan were far from strict. Back then, credit was widely available, and the threshold for qualifying for a loan was low.
Lenders were approving loans without always going through a verification process to confirm if the borrower would likely be able to repay the loan. That means creditors were lending to more borrowers who had a higher risk of defaulting on their loans.
Today’s Loans Are Much Tougher To Get than BeforeAs mentioned, lending standards have changed a lot since then. Bankrate describes the difference: 
“Today, lenders impose tough standards on borrowers – and those who are getting a mortgage overwhelmingly have excellent credit.”If you look back at the graph, you’ll notice after the peak around the time of the housing crash, the line representing the index went down dramatically and has stayed low since. In fact, the line is far below where standards were even in 2004 – and it’s getting lower. Joel Kan, VP and Deputy Chief Economist at MBA, provides the most recent update from May:
“Mortgage credit availability decreased for the third consecutive month . . . With the decline in availability, the MCAI is now at its lowest level since January 2013.”The decreasing index suggests standards are getting much tougher – which makes it clear we’re far away from the extreme lending practices that contributed to the crash.
Bottom LineLeading up to the housing crash, lending standards were much more relaxed with little evaluation done to measure a borrower’s potential to repay their loan. Today, standards are tighter, and the risk is reduced for both lenders and borrowers. This goes to show, these are two very different housing markets, and this market isn’t like the last time.
0 Comments



Leave a Reply.

    RSS Feed

    View my profile on LinkedIn

    Picture

      Subscribe to my monthly e-Newsletter The HOUSE Bulletin!

      You'll Receive:
      Monthly Giveaways
      Central Iowa Entertainment News
      Family Updates
      Opportunities for Community Service
      House Maintenance Tips

      ​
      And of course... Real Estate Advice!!!

    Keep Me Updated!

    Let's Connect

    With the correct person by your side, the buying and selling process doesn't have to be full of stress, doubt and anxiety - it can actually be FUN!
    ​Contact Jacquelyn Duke today to learn more!

    Archives

    April 2025
    March 2025
    February 2025
    January 2025
    December 2024
    November 2024
    October 2024
    September 2024
    August 2024
    July 2024
    June 2024
    May 2024
    April 2024
    March 2024
    February 2024
    January 2024
    December 2023
    November 2023
    October 2023
    September 2023
    August 2023
    July 2023
    June 2023
    May 2023
    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    September 2018
    April 2018
    March 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    July 2017
    March 2017
    December 2016

    Categories

    All
    Featured Listings For Sale

    Jacquelyn Duke, Realtor®
    Licensed to Sell in the State of Iowa


    [email protected]
    (515) 240-7483
    ​

    Realty One Group Impact 
    617 SW 3rd Street Ste 101
    Ankeny, IA 50023

    ​Disclaimer: The material on this site is solely for informational purposes. No warranties or representations have been made.
    Picture
Proudly powered by Weebly