TY - JOUR
T1 - Credit rationing in the U.S. mortgage market
T2 - Evidence from variation in FHA market shares
AU - Ambrose, Brent W.
AU - Pennington-Cross, Anthony
AU - Yezer, Anthony M.
N1 - Funding Information:
This paper examines the nature of mortgage credit rationing across geographic markets and time. Particular attention is paid to the response of conventional mortgage supply to higher risk conditions associated with regional recessions. We develop a series of four indirect tests based on the spatial variation of the FHA share of mortgages, both endorsements and applications, as well as FHA and conventional rejection rates. Results of these four tests indicate that conventional mortgage underwriting criteria do not become more flexible and may even become more demanding when local economic conditions deteriorate. This result indicates the use of non-price credit rationing in the mortgage market 1We thank Jan Brueckner, Charles Capone, Amy Crews-Cuts, Peter Linneman, Todd Sinai, the anonymous referees, and the seminar participants at the Fannie Mae Foundation and UC Berkeley for their helpful comments and suggestions. An earlier version of this paper was presented at the 1998 AREUEA Annual meeting. Partial financial support was provided by the Department of Housing and Urban Development Office of Policy Development and Research under contract DU100C000018441. Brent Ambrose acknowledges the support received by the Samuel Zell and Robert Lurie Real Estate Center Research Sponsors Program at the University of Pennsylvania.
PY - 2002
Y1 - 2002
N2 - This paper examines the nature of mortgage credit rationing across geographic markets and time. Particular attention is paid to the response of conventional mortgage supply to higher risk conditions associated with regional recessions. We develop a series of four indirect tests based on the spatial variation of the FHA share of mortgages, both endorsements and applications, as well as FHA and conventional rejection rates. Results of these four tests indicate that conventional mortgage underwriting criteria do not become more flexible and may even become more demanding when local economic conditions deteriorate. This result indicates the use of non-price credit rationing in the mortgage market and suggests a special role for FHA-insured mortgages as a mechanism for maintaining mortgage credit supply in declining housing markets.
AB - This paper examines the nature of mortgage credit rationing across geographic markets and time. Particular attention is paid to the response of conventional mortgage supply to higher risk conditions associated with regional recessions. We develop a series of four indirect tests based on the spatial variation of the FHA share of mortgages, both endorsements and applications, as well as FHA and conventional rejection rates. Results of these four tests indicate that conventional mortgage underwriting criteria do not become more flexible and may even become more demanding when local economic conditions deteriorate. This result indicates the use of non-price credit rationing in the mortgage market and suggests a special role for FHA-insured mortgages as a mechanism for maintaining mortgage credit supply in declining housing markets.
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U2 - 10.1006/juec.2001.2245
DO - 10.1006/juec.2001.2245
M3 - Article
AN - SCOPUS:0036130909
SN - 0094-1190
VL - 51
SP - 272
EP - 294
JO - Journal of Urban Economics
JF - Journal of Urban Economics
IS - 2
ER -