The Bank Lending Channel of Monetary Policy and Its Effect on Mortgage Lending

Figure 1: Core Lending Capacity and Its Effect on Loan Rates

Figure 1 describes the Core Lending Capacity and Its Effect on Loan Rates.

The x-axis is the loan-to-core deposit ratio. It runs from zero to 1.2. Each tick mark is 0.2 apart. The y-axis is the loan interest rate in terms of percentages. It runs from zero to 30. Each tick mark is 5% apart. The dark red line is the lenders with a high proportion of subprime lending. It runs from approximately 7 % to 26 %. The loan interest rate increases gradually from zero to approximately 20% until the loan-to-core deposit ratio is one. When the loan-to-core ratio is one, there is a sharp increase in the loan interest rate. The loan interest rate shoots up to around 26% and stays at 26% until the loan-to-core deposit ratio is 1.2. The dashed blue line is the lenders with a low proportion of subprime lending. It runs from approximately 4 % to 7%. The loan interest rate remains virtually flat at around 4% until the loan-to-core deposit ratio is one. When the loan-to-core deposit ratio is one, there is a sharp increase in the loan interest rate. The loan interest rate shoots up to around 7% and stays at 7% until the loan-to-core deposit ratio is 1.2.

Figure 2: Effect of Core Lending Capacity on the Spread

Figure 2 describes the Effect of Core Lending Capacity on the Spread.

The x-axis is the loan-to-core deposit ratio. It runs from zero to 1.4. Each tick mark is 0.2 apart. The y-axis is the multiple of the change in the loan rate relative to a change in the risk free rate. It runs from 1.2 to 1.26. Each tick mark is 0.01 apart. The dark red line is the lenders with a high proportion of subprime lending. It runs from approximately 1.221 to 1.25. The line increases gradually from 1.221 to approximately 1.24 until the loan-to-core deposit ratio is one. When the loan-to-core ratio is one, there is a sharp increase in the line. The line shoots up to around 1.25 and stays at 1.25 until the loan-to-core deposit ratio is 1.2. The dashed blue line is the lenders with a low proportion of subprime lending. It runs from approximately 1.205 to 1.212. The line slopes slightly downward until the loan-to-core deposit ratio is 0.6. When the loan-to-core deposit is 0.6, the line remains at 1.20 until the loan-to-core deposit reaches 0.8. When the loan-to-core deposit ratio reaches 0.8, the line slowly increases to 1.201. When the loan-to-core ratio is one, there is a sharp increase in the line. The line shoots up to around 1.215 and stays at 1.215 until the loan-to-core deposit ratio is 1.2.

Figure 3: Aggregate Mortgage Lending in Low Credit Score Tracts, 1995 to 2006 (600)
Panel 1: Number of Mortgage Originations by Year

Figure 3: Aggregate Mortgage Lending in Low Credit Score Tracts, 1995 to 2006 (600)
Panel 2: Dollar Amount of Mortgage Originations by Year

Figure 3: Aggregate Mortgage Lending in Low Credit Score Tracts, 1995 to 2006 (600)
Panel 3: Proportion by Year

Figure 3: Aggregate Mortgage Lending in Low Credit Score Tracts, 1995 to 2006 (600)

Figure 3 describes the Aggregate Mortgage Lending in Low Credit Score Tracts from 1995 to 2006 based on credit scores of 600. There are three separate graphs on this page.

The first graph is the number of mortgage originations by year. The x-axis is years and it runs from 1995 to 2006. Each tick marks a single year. The y-axis is number of originations in thousands. It runs from 0 to 5,000. Each tick mark is 500 apart. The total line is the total. The Low Credit Score Proportion Less than or Equal to 0.25 is the low credit score proportion less than or equal to 0.25 and the Low Credit Score Proportion more than 0.25 is the low credit score proportion more than 0.25. The Low Credit Score Proportion more than 0.25 runs from 477.122 to about 1821.711. It slowly increases from 1995 to 2002. By 2002 the number of originations increases from 477.122 to around 955.139. At 2002 there is a sharper increase until 2005. At 2005, there are approximately 1832.198 originations. In 2005, it remains flat until 2006. The Low Credit Score Proportion Less than or Equal to 0.25 line runs from 1204.345 to about 2531.064. It slowly increases from 1995 to 2002 .By 2002 the number of originations increases from 1204.345 to around 2133.253. At 2002 there is a sharper increase until 2005. At 2005, there are approximately 2833.108 originations. In 2005, it decreases to 2531.064 originations in 2006. The total line runs from 1681.467 to about 4352.775. It slowly increases from 1995 to 2002. By 2002 the number of originations increases from 1681.467 to around 3088.392. At 2002 there is a sharper increase until 2005. At 2005, there is approximately 4665.306 originations. In 2005, it decreases to 4352.775 originations in 2006.

The second graph is the dollar amount of the mortgage originations by year. The x-axis is years and it runs from 1995 to 2006. Each tick marks a single year. The y-axis is dollar amount of originations in millions. It runs from 0 to 12,000. Each tick mark is 200 apart. The total line is the total. The Low Credit Score Proportion less than or equal to 0.25 is the low credit score proportion less than or equal to 0.25 and the Low Credit Score Proportion more than 0.25 is the low credit score proportion more than 0.25. The Low Credit Score Proportion more than 0.25runs from 42.122 to about 301.942. It slowly increases from 1995 to 2005 .By 2005 the dollar amount increases from 42.122 to around 289.194. At 2005 there is a small increase to until 2006. At 2006, there is approximately 301.942 million dollars. The Low Credit Score Proportion less than or equal to 0.25 runs from 171.059 to about 730.392. It slowly increases from 1995 to 2005. By 2005 the dollar amount increases from 171.059 to around 730.392. At 2005 there is a sharper decrease until 2006. At 2006, there is approximately 625 million dollars. The total line runs from 213.180 to about 1019.585. It slowly increases from 1995 to 2005. By 2005 the dollar amount increases from 213.180 to around 1019.585. At 2005 there is a sharper decrease until 2006. At 2006, there is approximately 962.816 million dollars.

The third graph is the proportion by year. The x-axis is years. It runs from 1995 to 2006. Each tick mark is a single year. The y-axis is the proportion. It runs from 0.15 to 0.45. Each tick mark is 0.005 apart. The total line is the proportion of mortgages by number in low credit score tracts. It runs from 0.186 to 0.314. There is a slow decline in the proportion from 1995 to 1998. In 1998 it increases slowly to 0.187. It remains flat until around 2002. After 2002 there is a sharp increase. The Low Credit Score Proportion more than 0.25 shows the same pattern starting at 0.275 and ending at around 0.419.

Figure 4: Subprime Intensity Score Cut-offs (600)

Figure 4: Subprime Intensity Score Cut-offs (600)

Figure 4 describes the subprime intensity score cut-offs based on credit scores of 600.

The x-axis is the dates. It runs from 1995 quarter 1 through 2005 Quarter 3. Each tick mark represents a quarter. The y-axis is the subprime lending intensity score. It runs from 0.08 to 0.15. Each tick mark is 0.01 apart. The High Subprime-Community Lender Cut-offs is the high subprime community lender cut-offs at the 10% level. The Low Subprime-Community Lender Cut-offs is the low subprime community lender cut-offs at the 5% level. The High Subprime-Community Lender Cut-offs runs in an up and down pattern with a slowly increasing trend. It runs from 0.127 to 0.145. The Low Subprime-Community Lender Cut-offs runs in the same up and down pattern with a slowly increasing pattern. It runs from 0.102 to 0.122.

Figure 5: Median of Total Assets by Subprime-Community Lender Group, 1995:Q1-2005:Q1 (600)

Figure 5: Median of Total Assets by Subprime-Community Lender Group, 1995:Q1 - 2005:Q1 (600)

Figure 5 represents the median of total assets by subprime-community lender group based on credit scores of 600 from 1995 quarter 1 to 2005 quarter 1.

This is a bar chart with each year consisting of three different bars. The first bars are the low subprime community lenders. The second bars are the medium subprime community lenders. The third bars are the high subprime community lenders. The y-axis is the total assets in thousands of dollars. Each tick mark is 50,000 apart. The x-axis is years from 1995 to 2005. There is no obvious pattern across the lender groups in each year except the assets increase for all three groups from 1995 to 2005.

Figure 6: Loan-to-Core Deposit Ratios by Subprime-Community Lender Group
Panel 1: 25th Percentile

Figure 6: Loan-to-Core Deposit Ratios by Subprime-Community Lender Group
Panel 2: Medians

Figure 6: Loan-to-Core Deposit Ratios by Subprime-Community Lender Group
Panel 3: 75th Percentile

Figure 6: Loan-to-Core Deposit Ratios by Subprime-Community Lender Group (600)

Figure 6 describes the loan-to-core deposit ratios by subprime-community lender group based on credit scores of 600. There are three graphs on this page.

The first graph is for the 25 percentiles. The x-axis is the date. It runs from 1995 quarter 1 to 2005 Quarter 4. Each tick mark is a single year. The y-axis is the loan-to-core deposit ratio. It runs from 0.5 to 1.4. Each tick mark is 0.1 apart. The Low Subprime-Community Lenders is the first line in the legend. The Medium Subprime-Community Lenders is the second line in the legend. The High Subprime-Community Lenders is the third line in the legend. All three lines show an up and down pattern that slowly increases. The High Subprime-Community Lenders has a consistently lower loan-to-core deposit ratio. The pink and the Low Subprime-Community Lenders cross each other multiple times. The Low Subprime-Community Lenders runs from 0.77 to 1.38. The Medium Subprime-Community Lenders runs from 0.8 to 1.37. The High Subprime-Community Lenders runs from 0.74 to 1.13.

The second graph is for the median percentiles. The x-axis is the date. It runs from 1995 quarter 1 to 2005 Quarter 4. Each tick mark is a single year. The y-axis is the loan-to-core deposit ratio. It runs from 0.5 to 1.9. Each tick mark is 0.2 apart. The Low Subprime-Community Lenders is the first line in the legend. The Medium Subprime-Community Lenders is the second line in the legend. The High Subprime-Community Lenders is the third line in the legend. All three lines show an up and down pattern that slowly increases. The High Subprime-Community Lenders has a consistently lower loan-to-core deposit ratio. The pink and the Low Subprime-Community Lenders cross each other multiple times. The Low Subprime-Community Lenders runs from 0.94 to 1.73. The Medium Subprime-Community Lenders runs from 0.93 to 1.58. The High Subprime-Community Lenders runs from 0.88 to 1.38.

The third graph is for the 75th percentiles. The x-axis is the date. It runs from 1995 quarter 1 to 2005 Quarter 4. Each tick mark is a single year. The y-axis is the loan-to-core deposit ratio. It runs from 0.5 to 2.5. Each tick mark is 0.2 apart. The Low Subprime-Community Lenders is the first line in the legend. The Medium Subprime-Community Lenders is the second line in the legend. The High Subprime-Community Lenders is the third line in the legend. All three lines show an up and down pattern that slowly increases. The High Subprime-Community Lenders has a consistently lower loan-to-core deposit ratio. The pink and the Low Subprime-Community Lenders cross each other multiple times. The Low Subprime-Community Lenders runs from 1.1 to 2.36. The Medium Subprime-Community Lenders runs from 1.1 to 2.1. The High Subprime-Community Lenders runs from 1.0 to 1.7.