The Role of Government and Private Institutions in Credit Cycles in the U.S. Mortgage Market / Manuel Adelino, William B. McCartney, Antoinette Schoar.

Format:

Book

Author/Creator:

Adelino, Manuel.

Contributor:

National Bureau of Economic Research.

McCartney, William B.

Schoar, Antoinette.

Series:

Working Paper Series (National Bureau of Economic Research) no. w27499.

NBER working paper series no. w27499

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2020.

Summary:

We show that the distribution of combined loan-to-value ratios (CLTVs) for purchase mortgages in the U.S. has been remarkably stable over the last 25 years. But there was a dramatic shift during the housing boom of the 2000s in the provision of high- CLTV loans through private sources, which replaced almost one-for-one the share of high-CLTV loans directly guaranteed by the government, via FHA and VA. Post 2008, FHA/VA loans increased back to 30% of all purchase mortgages. This substitution between government and privately backed high-CLTV loans holds within ZIP codes, properties and borrower types over the full sample period. We also show that the increase in private high-CLTV lending follows local house price increases rather than preceding them. These findings suggest that the housing boom was not accompanied by a shift towards more high-CLTV loans, and instead favor models that rely on changes in collateral values or broad changes in house price expectations.

Notes:

Print version record

July 2020.