According to a brief written by the Urban Institute, borrowers with less than pristine credit, have difficulty getting a mortgage. It’s estimated that 4 million more loans would have been made between 2009 and 2013 if credit standards had been similar to 2001 levels. Credit is tight today due to various factors including:

• the issue of lender overlays due to repurchase risk
• to the high costs of servicing delinquent loans
• fears of litigation by the Department of Justice, the HUD Inspector General, or State Attorneys General

This means that fewer families will become homeowners at an opportune point in the housing market cycle, depriving these families of a critical wealth-building opportunity. It slows the housing market recovery by limiting the pool of potential borrowers. Ultimately, excessively tight credit hinders the economy, as it slows all the associated economic activity that comes with home buying, such as furniture purchases, landscaping, and renovations.

Excerpt taken from “Four Million Mortgage Loans Missing from 2009 to 2013 Due to Tight Credit Standards.”, Urban Institute, April 2, 2015