Measuring Mortgage Credit Availability: A Frontier Estimation Approach

51 Pages Posted: 5 Oct 2017

See all articles by Elliot Anenberg

Elliot Anenberg

Board of Governors of the Federal Reserve System

Aurel Hizmo

Board of Governors of the Federal Reserve System

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

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
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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