The Real Consequences of Bank Mortgage Lending Standards

53 Pages Posted: 16 May 2016 Last revised: 19 Dec 2018

See all articles by Cindy M. Vojtech

Cindy M. Vojtech

Board of Governors of the Federal Reserve System

Benjamin Kay

Board of Governors of the Federal Reserve System

John C. Driscoll

Federal Reserve Board

Date Written: October 17, 2018

Abstract

We examine the real effects of changes in bank mortgage loan underwriting standards by combining responses to the Federal Reserve’s Senior Loan Officer Opinion Survey, application information from the Home Mortgage Disclosure Act, and local housing market measures over 1990 to 2013. Tightened standards are associated with a 1 percentage point increase in denial rates and a 5 percent fall in loan issuance, controlling for applicant pool changes, but no change for predominantly securitizing banks. In areas with more exposure to banks that have tightened standards, mortgage delinquency rates, house prices, new home sales, and residential construction employment fall substantially.

Keywords: Residential Real Estate, Denial Rates, Credit Availability

JEL Classification: E02, E51, G21

Suggested Citation

Vojtech, Cindy M. and Kay, Benjamin and Driscoll, John C., The Real Consequences of Bank Mortgage Lending Standards (October 17, 2018). OFR WP 16-05. Available at SSRN: https://ssrn.com/abstract=2780468 or http://dx.doi.org/10.2139/ssrn.2780468

Cindy M. Vojtech

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Benjamin Kay (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://https://www.federalreserve.gov/econres/benjamin-s-kay.htm

John C. Driscoll

Federal Reserve Board ( email )

20th and C Streets, NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/john-c-driscoll.htm

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