Access to mortgage credit on sustainable terms can play a critical role in a family's ability to achieve financial prosperity.  Yet our ability to measure access to such credit is limited, largely because researchers and policy makers only have information about the credit characteristics of those who actually receive loans.  In this paper, we develop a methodology to better estimate access to mortgage credit for potential borrowers, focusing on those with lower credit profiles.  Except for an exploration of access by channel (government-insured, government-backed, private), we do not consider the terms or quality of the credit.

A prospective borrower goes through two basic steps to secure a mortgage: the step from demand to application and the step from application to origination. In this paper, we measure credit accessibility by assessing three rates of progress through this process, which we call Progression Rates: the demand to application progression rate (the portion of those consumers who want credit who actually submit an application), the application to origination progression rate (the portion of applicants who take out loans), and the overall demand to origination progression rate (the portion of those consumers who want credit who become actual borrowers). Understanding these rates will provide policy makers with better tools to assess credit accessibility over time and by demographic groups. Our results show that these measures reveal more intuitive trends than existing measures of credit accessibility and potential demand for credit through various stages of a credit cycle.

Using these measures, we explore several issues in critical credit accessibility: differences among demographic groups; changes over time and credit cycles; and the impact of government support for the single family owner-occupied mortgage market. Our results suggest four interesting conclusions: government-guaranteed (FHA/VA) lending has been successful in reducing racial gaps in loan approvals for low credit profile individuals seeking credit, particularly in the years following the collapse of the housing market; up until the collapse, the private market proved particularly accessible for racial minorities with low credit profiles; contrary to popular opinion, the GSEs extended relatively little credit to weaker credit profile consumers in the lead-up to the crisis; and mortgage credit has been extraordinarily tight since 2009.