Measuring Mortgage Credit Availability: A Frontier Estimation Approach

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...

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Bibliographic Details
Published in:Finance and economics discussion series 2017-09, Vol.2017 (101)
Main Authors: Anenberg, Elliot, Hizmo, Aurel, Kung, Edward, Molloy, Raven
Format: Article
Language:English
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Summary: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.
ISSN:1936-2854
DOI:10.17016/FEDS.2017.101