Housing analysts have consistently complained that credit remains overly tight, lenders haven’t been lending and borrowers are having a hard time getting home loans. Now, the Urban Institute has numbers to back up those complaints.

In a new study, the Washington, D.C.-based policy institute says more than 4 million home loans are “missing” from the period of 2009 to 2013. In other words, these loans could have been originated if lending standards had been the same as they were in 2001. But because lenders have been frightened away by new regulations that penalize them when loans default, all these loans were never originated, the Urban Institute says. In 2013 alone, 1.25 million loans were “missing,” the study says.

“Our tolerance for making loans that have any probability for defaulting is extremely low,” said Laurie Goodman, director of the Housing Finance Policy Center for the Urban Institute, one of the study’s authors.

“Basically, [lenders] are not making loans to people who have any non-trivial possibility of defaulting,” Goodman said during a telephone interview “The appetite for taking credit risk is much lower than it has ever been.”

Goodman said the problem is threefold.

Firstly, lenders are afraid they will be forced to repurchase loans from government-sponsored enterprises (GSEs) and the Federal Housing Administration (FHA). Agency loans have dominated the mortgage industry, accounting for as much as 80 percent of the market. Under the new regulations, lenders are under strict requirements to make accurate warranties and representations at origination. If mistakes are made during the application process, the lender may have to buy the loan back from the government agencies if the loan defaults, even if it was originated years earlier.

Secondly, the cost to service delinquent loans are considerably higher than a performing loan – $2,500 annually as opposed to around $150 – Goodman said. Thirdly, she said, lenders are concerned about potential litigation risks that hang over them.

The upshot of this, Goodman said, is that lenders are not lending to borrowers who don’t have pristine credit. The Urban Institute said that theory is revealed by comparing the number of loans originated during a “normal” credit climate of 2001 with the overly tight period between 2009 through 2013. Loans to borrowers with FICO scores greater than 720 are down 8.9 percent, down 37 percent for borrowers with FICO’s between 660 and 720, and down 76 percent for people with credit scores less than 660. Goodman said this indicates that lenders are much more reluctant to lend to people at the lower ends.

“This would be easy if it was one problem, but the fact is it is a lot of little problems,” Goodman said. “And you need to solve these problems to open the credit box.”

The Urban Institute study also said black and Hispanic borrowers, who tend to have lower credit scores, have been disproportionately shut out of the market.

Marisa Calderon, chief of staff for the National Association of Hispanic Real Estate Professionals, said the Urban Institute’s findings are consistent with what Hispanic Realtors are finding. The Association recently surveyed 100 top Hispanic real estate professionals. Some 60 percent said tight credit was the main barrier to Hispanic homeownership. Other major factors were affordability and inventory shortages.

“If we look back at just the past couple of years, Hispanics were turned down for home loans at twice the rate of non-Hispanic white borrowers and were more than twice as likely to pay a higher price for loans,” Calderon said. “That’s certainly an eye-opening statistic.”

Although many analysts support the view that mortgage credit is tight, the American Enterprise Institute’s (AEI) International Center on Housing Risk has been saying just the opposite.

“They are not correct for a number of reasons,” said the Center’s Co-Director Edward Pinto, a former executive with Fannie Mae. AEI’s position is that credit has been loosening steadily, particularly for sub-prime borrowers who most often take out 30-year fixed loans with low down payments guaranteed by the FHA. The Center has predicted that a quarter of the FHA loans would default if the economy suffered another crisis similar to 2008.

“By 2001, credit standards had already expanded quite a bit from what the normal level was back in the early 1990s,” Pinto said. “So, they are really picking a date that isn’t appropriate in making these comparisons. Be that as it may, they are basically saying we want to put all of these borrowers into risky loans. That is what the loans would be.”

Pinto said the national focus should not be on giving risky, long-term fixed loans to people at a higher risk of default. AEI favors reviving shorter-term, “wealth building” loans. These would amortize much quicker, building equity and removing much of the risk.

“I am not saying don’t make the loans,” Pinto said. “I am saying you have to make the loans responsible. We have to get out of the cycle that we have been in for decades, which is we are going to put high-risk borrowers in high-risk loans. That is what the Urban Institute is saying.”

Goodman, however, said 2001 is a good benchmark for a normal period, and the Urban Institute analysis says the overall market is taking on about half as much risk as it did in 2001. In other words, Goodman said, the overall market could reasonably take twice as much risk.

“The question is, what do you define as a risky mortgage?” she said. “Obviously, we all agree that credit was way too loose in the 2005-2007 period, but I think 2001 is a reasonable comparison.”