Search Results
Journal Article
The FHA and the GSEs as countercyclical tools in the mortgage markets
The authors examine the connection between government mortgage programs and economic outcomes during and after the financial crisis. They find a strong correlation between counties that participated more heavily in Federal Housing Administration (FHA)/Veterans Affairs (VA) and government-sponsored enterprise (GSE) mortgage lending before the crisis and better economic outcomes during and after the crisis. Although the financial crisis was a substantial shock to all counties, those more reliant on FHA/VA or GSE lending experienced smaller increases in unemployment rates; smaller declines in ...
Conference Paper
An outlook for subprime mortgages
Working Paper
The role of the securitization process in the expansion of subprime credit
We analyze the structure and attributes of subprime mortgage-backed securitization deals originated between 1997 and 2007. Our data set allows us to link loan-level data for over 6.7 million subprime loans to the securitization deals into which the loans were sold. We show that the securitization process, including the assignment of credit ratings, provided incentives for securitizing banks to purchase loans of poor credit quality in areas with high rates of house price appreciation. Increased demand from the secondary mortgage market for these types of loans appears to have facilitated ...
Working Paper
Are antidumping duties for sale? case-level evidence on the Grossman-Helpman protection for sale model
As successive rounds of global trade liberalization have lowered broad industry-level tariffs, antidumping duties have emerged as a WTO-consistent means of protecting certain industries. Using the Grossman-Helpman (GH) "Protection for Sale" model, we examine the extent to which political contributions affect the outcomes of decisions in antidumping cases. We find that antidumping duty rates tend to be higher for politically-active petitioners. The relationship between the import penetration ratio and duties imposed depends on whether or not petitioners in a case are politically active. ...
Working Paper
The rise in mortgage defaults
The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income. Contrary to popular perception, the growth in unconventional mortgages products, such as those with prepayment penalties, interest-only periods, and teaser interest rates, does not appear to be a significant factor in defaults through mid-2008 because borrowers who had problems with these products could refinance into different ...
Working Paper
GSEs, mortgage rates, and secondary market activities
Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that purchase mortgages and issue mortgage-backed securities (MBS). In addition, the GSEs are active participants in the primary and secondary mortgage markets on behalf of their own portfolios of MBS. Because these portfolios have grown quite large, portfolio purchases as well as MBS issuance are likely to be important forces in the mortgage market. This paper examines the statistical evidence of a connection between GSE actions and the interest rates paid by mortgage borrowers. We find that both portfolio purchases and ...
Working Paper
Student Loans and Homeownership
We estimate the effect of student loan debt on subsequent homeownership in a uniquely constructed administrative dataset for a nationally representative cohort. We instrument for the amount of individual student debt using changes to the in-state tuition rate at public 4-year colleges in the student's home state. A $1,000 increase in student loan debt lowers the homeownership rate by about 1.5 percentage points for public 4-year college-goers during their mid 20s, equivalent to an average delay of 2.5 months in attaining homeownership. Validity tests suggest that the results are not ...
Working Paper
Monetary policy and the housing bubble
We examine the role of monetary policy in the housing bubble. Our review examines the setting of monetary policy in the middle of this decade, the impetus from monetary policy to the housing market, and other factors that may have contributed to the run-up, and subsequent collapse, in house prices.
Working Paper
The competitive effects of risk-based bank capital regulation: an example from U.S. mortgage markets
Basel II bank capital regulations are designed to be substantially more risk sensitive than the current regulations. In the United States, only the largest banks would be required to adopt Basel II; other depositories could choose to adopt such standards or to remain under the Basel I capital standards. We consider possible effects of this two-pronged or "bifurcated" approach on the market for residential mortgages. Specifically, we analyze whether those institutions that adopt Basel II will enjoy lower costs than nonadopters and whether they have an incentive to retain mortgages in their ...
Working Paper
FHA, Fannie Mae, Freddie Mac, and the Great Recession
Did government mortgage programs mitigate the adverse economic effects of the financial crisis? We find that counties with greater participation in traditional government mortgage programs experienced less severe economic downturns during the Great Recession. In particular, counties with higher levels of participation in FHA, Fannie Mae, and Freddie Mac lending had relatively smaller increases in mortgage delinquency rates; smaller declines in purchase originations, home sales, home prices, and new automobile purchases; and smaller increases in unemployment rates. These results hold both in ...