The Real Consequences of Bank Mortgage Lending Standards
53 Pages Posted: 16 May 2016 Last revised: 19 Dec 2018
Date Written: October 17, 2018
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: Suggested Citation