Withdrawn flexible-documentation programs drove August's 2.5% jumbo credit decline

Run the two months together and credit is looser than it was in June. The index rose 2.5% in July to 108.4, so June's reading was about 105.76, and August's 107.3 sits roughly 1.5% above that ^[22]. The jumbo subindex travelled further in both directions: up 4.2% in July, down 2.5% in August, a net gain of about 1.6% ^[23]. August's fall was 1.1 index points ^[21].

What the index counts is loan programs ^[19][2]. MBA's overall numbers showed lenders decreased offerings by 1% between July and August ^[19]. "Credit availability decreased in August, as lenders reduced their offerings of loan programs that require flexible documentation, along with cash-out refinance loans," said Joel Kan, MBA's vice president and deputy chief economist ^[2]. "Many of these loan programs had jumbo features, which contributed to the decline in jumbo credit availability," he continued ^[3]. The decomposition MBA publishes runs by product feature.

The geography comes from a lender. Michael Borodinsky, a divisional builder branch manager at LoanDepot based in Edison, New Jersey, said the latest numbers may point to differences in regional market activity instead of an across-the-board decrease in credit volume ^[10]. "My take is there hasn't been a noticeable adjustment in either guidelines or availability of credit per se on the jumbo side," he said ^[11]. What he says has moved is the loan-to-value ratio: "We are seeing some tightening of LTVs with regard to declining markets, where markets went up too far too fast, and that, of course, is specifically regional. You're not seeing that yet in the Northeast, for example, but you are seeing it in other markets out West" ^[12].

A second cut of the same number runs by institution type. Josh Oleesky, a Southern California-based producing regional manager at Certainty Home Lending who previously worked as a banker at depository lenders, said banks appear to be getting stricter with jumbo and non-QM while independent mortgage banks make more of them available ^[13]. "In our world for non-QM, I feel the appetite is stronger," he said ^[14]. "I don't think it's a dramatic shift in jumbo lending, but I think lenders are becoming more selective around product structure," he added ^[15]. Non-QM transactions often carry the same large balances and rely on asset documentation instead of wage income ^[18]. On that reading the program count falls only to the extent banks drop more programs than IMBs add.

Foundation Mortgage Corp CEO Marc Halpern said secondary market securitization takeouts are "business as usual" for the most part, with close scrutiny once a loan rises above $5 million ^[16]. "They're really going to dig into not only if they have an appraisal; they're going to go look and do their own due diligence on value," Halpern said ^[17].

The read the published data supports is a menu adjustment in flexible-documentation and cash-out programs that happened to carry jumbo features, with conforming availability largely flat and government-backed lending at July's level ^[5][2]. The regional account is unverified by this report, not contradicted by it: none of the components MBA published in August is geographic ^[24]. September separates the two. If jumbo falls a second month while conforming stays flat, the declining-markets LTV story is doing the work; if jumbo climbs back toward its July level, August was product cleanup, which MBA itself allowed as a possible reversion to levels from earlier this year ^[20].