Journal of Applied Econometrics

Measuring mortgage credit availability: A frontier estimation approach

Early View

Summary We construct a new measure of mortgage credit availability using a technique developed for production frontier estimation. The resulting “loan frontier” describes the maximum amount obtainable by a borrower of given characteristics. We estimate this frontier using mortgage originations data from 2001 to 2014. We find a substantial expansion of mortgage credit for all borrowers during the housing boom, not only for low‐score or low‐income borrowers. The subsequent contraction in credit 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.

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