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18 posts on "Mortgages"

August 23, 2017

At the New York Fed: The Appropriate Government Role in U.S. Mortgage Markets



While the U.S. mortgage finance system was at the center of the recent financial crisis, it remains largely untouched by legislative reforms. At the center of these conversations are Fannie Mae and Freddie Mac—both of which were placed into federal conservatorship in September 2008. Now, nearly nine years later, the fate of these two government-sponsored enterprises (GSEs) and the prospect of related changes to the mortgage finance system are once again a focus of policy discussion. In this post, we summarize the main themes of a recent New York Fed workshop where policymakers, academics, and practitioners gathered to consider the future structure of the U.S. housing finance system.

Continue reading "At the New York Fed: The Appropriate Government Role in U.S. Mortgage Markets" »

Posted by Blog Author at 7:00 AM in Housing, Mortgages | Permalink | Comments (0)

June 01, 2017

Just Released: Bank Loan Performance Under the Magnifying Glass



LS_2017_Just Released:  Bank Loan Performance Under the Magnifying Glass

The New York Fed’s recently released Quarterly Trends for Consolidated U.S. Banking Organizations (QT report) confirms that bank loan portfolios look a lot healthier than they did just a few years ago, reflecting the sustained economic recovery from the Great Recession. In this post, we sharpen the focus to look at bank loan performance in more detail, using more disaggregated charts added to the QT report this quarter.

Continue reading "Just Released: Bank Loan Performance Under the Magnifying Glass" »

Posted by Blog Author at 7:00 AM in Banks, Mortgages | Permalink | Comments (0)

March 27, 2017

Being Up Front about the FHA’s Up-Front Mortgage Insurance Premiums



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The Federal Housing Administration (FHA) played a significant role in maintaining mortgage credit availability following the onset of the subprime mortgage crisis and through the Great Recession. Not surprisingly, the FHA’s expansion during a period of falling home prices and deteriorating economic conditions resulted in material losses to its mortgage insurance fund arising from mortgage defaults and foreclosures. These losses, in turn, have generated increased policy interest in the design of the FHA mortgage insurance program. In this post we analyze how the cost of FHA insurance is shared between mortgage defaulters and non-defaulters and find that non-defaulters pay a disproportionate share. Although the ten-year cumulative default rate for our sample of FHA mortgages is 26 percent, defaulters only pay 17 percent of total mortgage insurance premiums. We discuss changes to the FHA mortgage insurance pricing that would shift more of the premium cost to defaulters.

Continue reading "Being Up Front about the FHA’s Up-Front Mortgage Insurance Premiums" »

Posted by Blog Author at 7:00 AM in Credit, Household Finance, Mortgages | Permalink | Comments (1)

February 15, 2017

Houses as ATMs No Longer



LSE_Houses as ATMs No Longer

Housing equity is the primary form of collateral that households use for borrowing. This makes it a potentially important source of consumption funding, especially for younger households. In a previous post we showed that owner’s equity in residential real estate has finally, thanks to increasing home prices, rebounded to and essentially re-attained its 2005 peak level. Yet in spite of a gain of more than $7 trillion in housing equity since 2012, so far homeowners haven’t been tapping this equity at anything like the pace we witnessed during the housing boom that ended in 2006. In this post, we analyze the changes in equity withdrawal.

Continue reading "Houses as ATMs No Longer" »

Posted by Blog Author at 7:00 AM in Credit, Household Finance, Mortgages | Permalink | Comments (0)

June 20, 2016

Risky Business: Government Mortgage Insurance Programs



Editors’ note: The column headings in the final table in this post have been corrected from an earlier version.

LSE_Risky Business: Government Mortgage Insurance Programs

Homeownership has long been a U.S. public policy goal. One of the many ways that the federal government subsidizes homeownership is through mortgage insurance programs operated by the Federal Housing Administration (FHA), the Department of Veterans Affairs (VA), and the USDA’s Rural Housing Service (RHS). These programs facilitate home financing opportunities for first-time and low- and moderate-income homebuyers. Virtually all of these government-insured mortgages are securitized by Ginnie Mae, a government agency that guarantees the timely payment of principal and interest of these loans to investors that purchase the securities. That is, the U.S. taxpayers assume the credit risk on these mortgages. In this post, we assess the riskiness of these loans.

Continue reading "Risky Business: Government Mortgage Insurance Programs" »

Posted by Blog Author at 7:00 AM in Financial Institutions, Household Finance, Mortgages | Permalink | Comments (0)

February 12, 2016

Just Released: Household Debt Grew Slowly in 2015 as Mortgage Balances Stayed Flat



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This morning, New York Fed President William Dudley spoke to the press about the growing resilience of the U.S. household sector. His speech was followed by a briefing by New York Fed economists on developments in household borrowing. Their presentation included a detailed decomposition on mortgage borrowing and payment trends, and some new research on how borrowing has evolved differently across age groups. Today, the New York Fed also released the Quarterly Report on Household Debt and Credit for the fourth quarter of 2015. The report, the press briefing , and the following analysis are all based on the New York Fed Consumer Credit Panel, which is itself based on consumer credit data from Equifax.

Continue reading "Just Released: Household Debt Grew Slowly in 2015 as Mortgage Balances Stayed Flat" »

Posted by Blog Author at 10:05 AM in Household Finance, Housing, Mortgages | Permalink | Comments (1)

October 15, 2015

Evaluating the Rescue of Fannie Mae and Freddie Mac



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In September 2008, the U.S. government engineered a dramatic rescue of Fannie Mae and Freddie Mac, placing the two firms into conservatorship and committing billions of taxpayer dollars to stabilize their financial position. While these actions were characterized at the time as a temporary “time out,” seven years later the firms remain in conservatorship and their ultimate fate is uncertain. In this post, we evaluate the success of the 2008 rescue on several key dimensions, drawing from our recent research article in the Journal of Economic Perspectives.

Continue reading "Evaluating the Rescue of Fannie Mae and Freddie Mac" »

Posted by Blog Author at 7:00 AM in Crisis, Financial Institutions, Housing, Mortgages | Permalink | Comments (5)

August 24, 2015

Rethinking Mortgage Design

John Campbell, Andreas Fuster, David Lucca, Stijn Van Nieuwerburgh, and James Vickery

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Because mortgages make up the majority of household debt in most developed countries, mortgage design has important implications for macroeconomic policy and household welfare. As one example, most U.S. mortgages have fixed interest rates—if interest rates fall, existing borrowers need to refinance to lower their interest payments. In practice, households are often slow to refinance, or may not be able to do so. As a result, the transmission of U.S. monetary policy is dampened relative to countries like the United Kingdom where mortgage rates on most loans adjust automatically with short-term interest rates. In this post, we discuss some of the key takeaways from a recent conference where policymakers, academics, practitioners, and other experts convened to discuss mortgage design and consider possible mortgage market innovations.

Continue reading "Rethinking Mortgage Design" »

Posted by Blog Author at 7:00 AM in Household Finance, Housing, Mortgages | Permalink | Comments (1)

April 20, 2015

Credit Supply and the Housing Boom



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There is no consensus among economists as to what drove the rise of U.S. house prices and household debt in the period leading up to the recent financial crisis. In this post, we argue that the fundamental factor behind that boom was an increase in the supply of mortgage credit, which was brought about by securitization and shadow banking, along with a surge in capital inflows from abroad. This argument is based on the interpretation of four macroeconomic developments between 2000 and 2006 provided by a general equilibrium model of housing and credit.

Continue reading "Credit Supply and the Housing Boom" »

Posted by Blog Author at 7:00 AM in Macroecon, Mortgages | Permalink | Comments (5)

July 15, 2013

Improving Access to Refinancing Opportunities for Underwater Mortgages

Joshua Abel and Joseph Tracy

Since the onset of the housing crisis, a focus of policymakers has been to help underwater homeowners lower their monthly mortgage payments by refinancing, principally through the Home Affordable Refinance Program (HARP). This enables households to commit more money to consumption, debt reduction, and saving. Lower monthly payments also decrease the risk of mortgage defaults, allowing homeowners to stay in their homes and reducing expected losses for mortgage guarantors Fannie Mae and Freddie Mac, which remain under conservatorship of the Federal Housing Finance Agency. Stanching the flow of defaults also helps to firm up the housing market and, therefore, the economy as a whole. In this post, we examine some simple adjustments to HARP that would help to continue the program’s recent success and provide additional support to the housing market recovery—an undertaking that has added significance with the recent increase in mortgage rates, which could hamper refinancing activity moving forward.

Continue reading "Improving Access to Refinancing Opportunities for Underwater Mortgages" »

Posted by Blog Author at 7:00 AM in Housing, Mortgages | Permalink | Comments (4)
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