Document Type




Format of Original

23 p.

Publication Date




Source Publication

Journal of Urban Economics

Source ISSN



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.


Accepted version. Journal of Urban Economics, Vol. 51, No. 2 (March 2002): 272-294. DOI. © 2002 Elsevier. Used with permission.

NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Urban Economics. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Urban Economics, VOL 51, ISSUE 2, March 2002, DOI.

Anthony Pennington-Cross was affiliated with the Office of Federal Housing Enterprise Oversight at the time of publication.