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The United States relies heavily on securitization for funding residential mortgages. But for institutional reasons, large mortgages, or “jumbos,” are more difficult to securitize, and are instead usually held as whole loans by banks. How does this structure affect the pricing and availability of jumbo mortgages? In this post we show that the supply of jumbo mortgages has improved in recent years as banks have become more willing to take on mortgage credit risk on their own balance sheets.
Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
The New York Fed’s Center for Microeconomic Data today released our Quarterly Report on Household Debt and Credit for the fourth quarter of 2017. Along with this report, we have posted an update of state-level data on balances and delinquencies for 2017. Overall aggregate debt balances increased again, with growth in all types of balances except for home equity lines of credit. In our post on the first quarter of 2017 we reported that overall balances had surpassed their peak set in the third quarter of 2008—the result of a slow but steady climb from several years of sharp deleveraging during the Great Recession.
Jean-Noel Barrot, Erik Loualiche, Matthew Plosser, and Julien Sauvagnat
In the years preceding the Great Recession, the United States experienced a dramatic rise in household debt and an unprecedented increase in import competition. In a recent staff report, we outline a link between these two seemingly unrelated phenomena. We argue that the displacement of workers exposed to import competition fueled their demand for mortgage credit, which left many households more vulnerable to the eventual downturn in the housing market.
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.
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.
W. Scott Frame, Kristopher Gerardi, and Joseph Tracy
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.
Andreas Fuster, Eilidh Geddes, and Andrew Haughwout
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.
W. Scott Frame, Kristopher Gerardi, and Joseph Tracy
Editors’ note: The column headings in the final table in this post have been corrected from an earlier version.
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.
Meta Brown, Donghoon Lee, Andrew Haughwout, Joelle Scally, and Wilbert van der Klaauw
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.
W. Scott Frame, Andreas Fuster, Joseph Tracy, and James Vickery
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.
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Donald Morgan, all economists in the Bank’s Research Group.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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