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Credit Rationing In The U.S. Mortgage Market: Evidence From Variation In Fha Market Shares, Brent W. Ambrose, Anthony Pennington-Cross, Anthony M. Yezer
Credit Rationing In The U.S. Mortgage Market: Evidence From Variation In Fha Market Shares, Brent W. Ambrose, Anthony Pennington-Cross, Anthony M. Yezer
Anthony Pennington-Cross
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 …
Borrower Self-Selection, Underwriting Costs, And Subprime Mortgage Credit Supply, Joseph Nichols, Anthony Pennington-Cross, Anthony Yezer
Borrower Self-Selection, Underwriting Costs, And Subprime Mortgage Credit Supply, Joseph Nichols, Anthony Pennington-Cross, Anthony Yezer
Anthony Pennington-Cross
In the U.S., households participate in two very different types of credit markets. Personal lending is characterized by continuous risk-based pricing in which lenders offer households a continuous distribution of borrowing possibilities based on estimates of their creditworthiness. This contrasts sharply with mortgage markets where lenders specialize in specific risk categories of borrowers and mortgage supply is stepwise linear. The contrast between continuous lending for personal loans and discrete lending by specialized lenders for mortgage credit has led to concerns regarding the efficiency and equity of mortgage lending. This paper sheds both theoretical and empirical light on the differences in …