This study investigated the effects of programs dealing with risk-based pricing and increased mortgage loan limits on mortgage approval rates for low- and moderate-income households. The research performed for the study found that risk-based pricing policies did have a positive impact on the extension of residential mortgages to low- and moderate-income applicants, in that rejection rates associated with risk-based factors declined. The research performed also found that higher mortgage limit policies had a positive impact on the extension of residential mortgages to low- and moderate-income applicants, in that rejection rates associated with risk-based factors declined. Lastly, the research results indicated that higher mortgage limit policies had a greater positive impact than did risk-based pricing policies.
The findings that both risk-based pricing policies and higher mortgage limit policies had positive impacts on the extension of residential mortgages to low- and moderate-income applicants caused the finding that, in the aggregate, mortgage approval rates for low- and moderate-income persons actually declined over the period of analysis to be even more unfathomable than it already was. The implication of these findings considered together is that mortgage lenders and lending agencies have resorted to other grounds for the rejection of low- and moderate-income applicants for residential mortgages.
Additional research was performed to assess the comparative performance of federal mortgage lending agencies and conventional lenders in relation to both risk-based pricing policies and higher mortgage loan limit policies. In each instance, it was found that the conventional lenders outperformed the federal agencies when the performance measure was the rejection rate.
Aggregate rejection rates for low- and moderate-income applicants, however, remain far higher among conventional lenders than among the federal mortgage len...