4 million: The number of mortgages that never happened

by MPA07 Apr 2015
Researchers at the Urban Institute (UI) claim that 4 million more loans would have been made between 2009 and 2013 if lenders had used the same credit standards as were used in 2001.

 “Borrowers with anything less than pristine credit have a hard time getting a mortgage today. Mortgage credit is much tighter than it was at the peak of the housing bubble in 2005 and 2006, as is both expected and appropriate,” wrote the authors. “Today’s lenders are simply not originating loans for borrowers with less than perfect credit.”
According to Urban’s estimates, an additional 1.25 million loans would have been made in 2013 “if the cautious standards of 2001, rather than the severe standards of 2013, had been in place.” Between 2009 and 2013, the number of missing loans grew from 0.50 million to 1.25 million annually, for a total of more than 4 million missing loans over the five years.
African American and Hispanic families have been particularly affected by this tight credit environment, according to the report. In 2013, the severe standards meant lending to African American and Hispanic borrowers was 50 and 38% less, respectively, than what it was in 2001.
In contrast, the more severe standards reduced lending to white borrowers by about 31% and did not reduce lending to Asian families at all.
The report looks specifically at FICO scores. Less than 40% of borrowers in 2013, using their loans to purchase a home, not refinance, had FICO scores below 720. In 2001, more than half did.
As for why the credit box remains so tight, the report points to lenders adding to credit standards because they are so worried they might be forced to pay back any loans that default. This so-called repurchase risk has been at the heart of credit tightening, since banks were forced to pay back billions of dollars in bad loans during the foreclosure crisis. Banks are also worried about litigation and the high cost of servicing troubled loans.
Click here to read the full report.


  • by Jburns | 4/7/2015 1:36:04 PM

    The easying of credit began in the mid 1990's under the Clinton administration, and was in full swing in the early 2000's. The escalating values of real estate continued to bail out poor credit, no income no asset products, that were being pushed by the federal government, strickly for political purposes. That bubble burst in 2007. "Researchers" continue to try and relate credit descrimination to race, and it has nothing to do with it. It is all about the ability to repay based on credit, income, job stability and reserves and/or down payment. Always has been and always will be. Color of skin is not taken into consideration, never has never will be. Running a lending operation profitably has to do with ability of the borrower to repay and therefore low deliquentcy, whether it is a bank, mortgage banker, or Fannie and Freddie. Government intervention into that ability to make proper decisions, in lies the whole problem in a nut shell. How many decades, and how many millions of dollars wasted on researchers and rulemakers, is it going to take to figure out what is so obvious to everyone except federal politicians.


Should CFPB have more supervision over credit agencies?