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Author:Loewenstein, Lara 

Working Paper
Technological Innovation in Mortgage Underwriting and the Growth in Credit: 1985-2015

The application of information technology to finance, or ?fintech,? is expected to revolutionize many aspects of borrowing and lending in the future, but technology has been reshaping consumer and mortgage lending for many years. During the 1990s computerization allowed mortgage lenders to reduce loan-processing times and largely replace human-based assessment of credit risk with default predictions generated by sophisticated empirical models. Debt-to-income ratios at origination add little to the predictive power of these models, so the new automated underwriting systems allowed higher ...
Working Papers (Old Series) , Paper 1816

Working Paper
Cross-Sectional Patterns of Mortgage Debt during the Housing Boom: Evidence and Implications

In this paper, we use two comprehensive micro datasets to study the evolution of the distribution of mortgage debt during the 2000s housing boom. We show that the allocation of mortgage debt remained stable, as did the distribution of real estate assets. We propose that any theory of the boom must replicate this fact. Using a general equilibrium model, we show that this requires two elements: (1) an exogenous shock to the economy that increases expected house price growth or, alternatively, reduces interest rates and (2) financial markets that endogenously relax constraints in response to the ...
Working Papers , Paper 201919

Working Paper
Technological innovation in mortgage underwriting and the growth in credit, 1985–2015

The application of information technology to finance, or ?fintech,? is expected to revolutionize many aspects of borrowing and lending in the future, but technology has been reshaping consumer and mortgage lending for many years. During the 1990s, computerization allowed mortgage lenders to reduce loan-processing times and largely replace human-based assessments of credit risk with default predictions generated by sophisticated empirical models. Debt-to-income ratios at origination add little to the predictive power of these models, so the new automated underwriting systems allowed higher ...
Working Papers , Paper 19-11

Working Paper
Cross-sectional patterns of mortgage debt during the housing boom: evidence and implications

The reallocation of mortgage debt to low-income or marginally qualified borrowers plays a central role in many explanations of the early 2000s housing boom. We show that such a reallocation never occurred, as the distribution of mortgage debt with respect to income changed little even as the aggregate stock of debt grew rapidly. Moreover, because mortgage debt varies positively with income in the cross section, equal percentage increases in debt among high- and low-income borrowers meant that wealthy borrowers accounted for most new debt in dollar terms. Previous research stressing the ...
Working Papers , Paper 16-12

Journal Article
Subprime May Not Have Caused the 2000s Housing Crisis: Evidence from Cleveland, Ohio

During the 2000s housing bust, Cleveland’s Slavic Village was dubbed “ground zero of the foreclosure crisis” by the national media. Despite this, during the preceding housing boom Cleveland had stable house price growth and relatively low mortgage debt growth, a stark contrast to circumstances in areas such as California that had exceptionally high house price and mortgage debt growth. What explains the relatively minor housing boom and perceived sharp downturn in Cleveland? In this Commentary I show that while subprime debt was a prominent source of debt in Cleveland and especially in ...
Economic Commentary , Volume 2020 , Issue 25 , Pages 8

Working Paper
Evaluating the Benefits of a Streamlined Refinance Program

Mortgage borrowers who have experienced employment disruptions as a result of the COVID-19 pandemic are unable to refinance their loans to take advantage of historically low market rates. In this article, we analyze the effects of a streamlined refinance (“refi”) program for government-insured loans that would allow borrowers to refinance without needing to document employment or income. In addition, we consider a cash-out component that would allow borrowers to extract some of the substantial housing equity that many have accumulated in recent years.
Working Papers , Paper 202021

Discussion Paper
Evaluating the Benefits of a Streamlined Refinance Program

Mortgage borrowers who have experienced employment disruptions as a result of the COVID-19 pandemic are unable to refinance their loans to take advantage of historically low market rates. In this article, we analyze the effects of a streamlined refinance ("refi") program for government-insured loans that would allow borrowers to refinance without needing to document employment or income. In addition, we consider a cash-out component that would allow borrowers to extract some of the substantial amount of housing equity that many have accumulated in recent years.
Policy Hub , Paper 2020-08

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