Credit rationing in the U.S. mortgage market: Evidence from variation in FHA market shares

Brent W. Ambrose, Anthony Pennington-Cross, Anthony M. Yezer

Research output: Contribution to journalArticle

21 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)272-294
Number of pages23
JournalJournal of Urban Economics
Volume51
Issue number2
DOIs
StatePublished - 2002

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics
  • Urban Studies

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