This observation underscores the importance of efforts to improve the condition of the housing market. Availability of mortgage credit So why has the recovery in housing been so slow? One important factor is restraints on mortgage credit. Since its peak in 2007, U.S. home mortgage credit outstanding has contracted about 13 percent in real terms.
In prior recoveries, mortgage credit had begun to grow four years after the business cycle peak – but not this time around.8 One reason for the very slow recovery in mortgage credit, despite monetary policy actions that have helped drive mortgage rates to historically low levels, is that many lending institutions have tightened underwriting conditions dramatically, relative to the pre-recession period.9 Given the lax standards during the credit boom, some tightening was doubtless appropriate to protect consumers and ensure lenders’ safety and soundness.