Credit and Collateral: Rising Denial Rates on Home Purchase Mortgage Applications, 2001-2011

Abstract

Using a sample of purchase mortgage applications reported in HMDA between 2001 and 2011, this paper estimates how the likelihood that an application is denied by the lender has changed over time after accounting for characteristics of loan applicants. Contrary to the observed decline in the gross denial rate since 2007, this paper finds the odds of being denied in 2011 were twice what they were a decade earlier. More than 60 percent of the increase in the likelihood of denial between 2007 and 2009 is attributable to concerns about the value of the property used to secure the mortgage.

Keywords: Home Mortgage Disclosure Act, mortgage, collateral,

JEL Classification: R30, G21