Access to credit is opening up, right?

According to the Federal Reserve, the recent news that mortgage credit availability increased slightly in February is counter balanced by the fact potential borrowers are still being rejected at a historically high rate.

So, how many are being rejected?

Every four months the New York Fed compiles its SCE Credit Access Survey. This provides information on consumers' experiences and expectations regarding credit demand and credit access over the last 12 months.

The Fed collect this information for five specific credit products: auto loans, credit cards, credit card limit increases, mortgages, and mortgage refinancing.

According to the results, consumer attitudes towards the availability of applying for, and getting, a mortgage is not changing.

That, alone, is not good news as fully 40% of those who might want a mortgage think they’ll be rejected if they apply (see chart below, click to expand).

Fed mortgage expectations

The real shocker, though, is in the following chart that shows the rejection rate (brown line) is still historically high. Just in the last year, the mortgage refection rate jumped 10%, from around 15% of mortgage applications being rejected to nearly 25% being rejected (see chart below, click to expand).


SCE credit report

The word may be getting out that there are more types of mortgages available, such as the recent low-down-payment options from the government-sponsored enterprises.

But the sad reality is that those few people who think they can get a mortgage, too many aren’t making it across the credit finish line.

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