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Measuring Mortgage Credit Availability: A Frontier Estimation Approach

51 Pages Posted: 5 Oct 2017  

Elliot Anenberg

Board of Governors of the Federal Reserve System

Aurel Hizmo

New York University (NYU) - Department of Finance

Edward Kung

University of California, Los Angeles (UCLA)

Raven Molloy

Board of Governors of the Federal Reserve System

Date Written: 2017-09-29

Abstract

We construct a new measure of mortgage credit availability that describes the maximum amount obtainable by a borrower of given characteristics. We estimate this "loan frontier" using mortgage originations data from 2001 to 2014 and show that it reflects a binding borrowing constraint. Our estimates reveal that the expansion of mortgage credit during the housing boom was substantial for all borrowers, not only for low-score or low-income borrowers. The contraction was most pronounced for low-score borrowers. Using variation in the frontier across metropolitan areas over time, we show that borrowing constraints played an important role in the recent housing cycle.

Keywords: Constraints, Construction, Credit Availability, Frontier, House prices, Mortgages

JEL Classification: G21, R21, R31, D12, G10, R20

Suggested Citation

Anenberg, Elliot and Hizmo, Aurel and Kung, Edward and Molloy, Raven, Measuring Mortgage Credit Availability: A Frontier Estimation Approach (2017-09-29). FEDS Working Paper No. 2017-101. Available at SSRN: https://ssrn.com/abstract=3047774 or http://dx.doi.org/10.17016/FEDS.2017.101

Elliot Anenberg (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

Aurel Hizmo

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

Edward Kung

University of California, Los Angeles (UCLA) ( email )

405 Hilgard Avenue
Box 951361
Los Angeles, CA 90095
United States

Raven Molloy

Board of Governors of the Federal Reserve System ( email )

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

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