The Real Consequences of Bank Mortgage Lending Standards

48 Pages Posted: 16 May 2016 Last revised: 15 Nov 2016

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: September 7, 2016

Abstract

Bank loan underwriting standards are important for credit availability. We match the Federal Reserve’s Senior Loan Officer Opinion Survey with the Home Mortgage Disclosure Act and other datasets over 1990 to 2013. Tightened standards are associated with a 1 percentage point increase in application denial rates – more for banks holding more loans on balance sheet – and a 16 percent decrease in riskier loans. Markets with more exposure to banks tightening standards see mortgage delinquency rates fall by 3 percentage points two years later, and house prices, sales of newly-constructed homes, and residential construction employment decline by 2.5, 9, and 6.5 percent, respectively

Keywords: Residential real estate, denial rates, credit availablity

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 (September 7, 2016). 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

Register to save articles to
your library

Register

Paper statistics

Downloads
92
rank
264,731
Abstract Views
528
PlumX Metrics