The real consequences of bank mortgage lending standards

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 standa...

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Bibliographic Details
Published in:Journal of financial intermediation 2020-10, Vol.44, p.100846, Article 100846
Main Authors: Vojtech, Cindy M., Kay, Benjamin S., Driscoll, John C.
Format: Article
Language:English
Subjects:
Credit availability
Denial rates
Residential real estate
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Summary: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% 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.
ISSN:1042-9573
1096-0473
DOI:10.1016/j.jfi.2019.100846