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Working Paper
The Marginal Effect of Government Mortgage Guarantees on Homeownership
Kim, You Suk; Grundl, Serafin J. (2019-04-16)
The U.S. government guarantees a majority of residential mortgages, which is often justified as a means to promote homeownership. In this paper we use property-level data to estimate the effect of government mortgage guarantees on homeownership, by exploiting variation of the conforming loan limits (CLLs) along county borders. We find substantial effects on government guarantees, but find no robust effect on homeownership. This finding suggests that government guarantees could be considerably reduced with modest effects on homeownership, which is relevant for housing finance reform plans that ...
Finance and Economics Discussion Series , Paper 2019-027

Working Paper
Financing Affordable and Sustainable Homeownership with Fixed-COFI Mortgages
Passmore, Wayne; von Hafften, Alexander H. (2018-02-05)
The 30-year fixed-rate fully amortizing mortgage (or ?traditional fixed-rate mortgage?) was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With this sluggish equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowners might have better uses for this ...
Finance and Economics Discussion Series , Paper 2018-009

Working Paper
What determines the level of local business property taxes?
Merriman, David (2016-01-01)
Conventional economic theory intuitively holds that local business property taxes, which account for over one-third of the state and local taxes that firms pay, should be efficiently structured in order to recover the exact cost of providing public services to these firms. However, this conceptual thinking does not accord with observed geographic and over-time variation in business taxation. To better explain these discrepancies, the author develops an alternative theoretical model with heterogeneous firms, some of which are more profitable than others in certain locations. This model more ...
Working Papers , Paper 16-2

Working Paper
Housing Supply and Affordability: Evidence from Rents, Housing Consumption and Household Location
Molloy, Raven S.; Nathanson, Charles G.; Paciorek, Andrew D. (2020-06-12)
We examine how housing supply constraints affect housing affordability, which we define as the quality-adjusted price of housing services. In our dynamic model, supply constraints increase the price of housing services by only half has much as the purchase price of a home, since the purchase price responds to expected future increases in rent as well as contemporaneous rent increases. Households respond to changes in the price of housing services by altering their housing consumption and location choices, but only by a small amount. We evaluate these predictions using common measures of ...
Finance and Economics Discussion Series , Paper 2020-044

Working Paper
Improving the 30-Year Fixed-Rate Mortgage
von Hafften, Alexander H.; Passmore, Wayne (2017-08-25)
The 30-year fixed-rate fully amortizing mortgage (or "traditional fixed-rate mortgage") was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With so little equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowner might have better uses for this ...
Finance and Economics Discussion Series , Paper 2017-090

Working Paper
An agency problem in the MBS market and the solicited refinancing channel of large-scale asset purchases
Kandrac, John; Schlusche, Bernd (2015-03-31)
In this paper, we document that mortgage-backed securities (MBS) held by the Federal Reserve exhibit faster principal prepayment rates than MBS held by the rest of the market. Next, we show that this stylized fact persists even when controlling for factors that affect prepayment behavior, and thus determine the MBS that are delivered to the Federal Reserve. After ruling out several potential explanations for this result, we provide evidence that points to an agency problem in the secondary market for MBS, which has not previously been documented, as the most likely explanation for the ...
Finance and Economics Discussion Series , Paper 2015-27

Discussion Paper
Blight remediation in the Southeast: local approaches to design and implementation
Mitchell, Emily; Carpenter, Ann; Price, Shelley (2015-11-01)
Blight?or the proliferation of vacant, abandoned, or poorly maintained properties?is a critical community issue in many cities in the Southeast as in other regions of the United States, as economic shifts experienced in the past few decades have changed neighborhoods significantly. Municipalities dealing with this issue recognize what is well documented in the literature?that blight is associated with social, economic, environmental, and public health effects on neighborhoods. The recent recession has led to a surge of abandoned and bank-owned properties, disproportionately located in poor ...
FRB Atlanta Community and Economic Development Discussion Paper , Paper 2015-5

Working Paper
Equilibrium Evictions
Corbae, Dean; Glover, Andrew; Nattinger, Michael (2023-04-21)
We develop a simple equilibrium model of rental markets for housing in which eviction occurs endogenously. Both landlords and renters lack commitment; a landlord evicts a delinquent tenant if they do not expect total future rent payments to cover costs, while tenants cannot commit to paying more rent than they would be able or willing to pay given their outside option of searching for a new house. Renters who are persistently delinquent are more likely to be evicted and pay more per quality-adjusted unit of housing than renters who are less likely to be delinquent. Evictions are never ...
Research Working Paper , Paper RWP 23-03

Working Paper
Evaluating the Benefits of a Streamlined Refinance Program
Willen, Paul S.; Gerardi, Kristopher S.; Loewenstein, Lara (2020-07-08)
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 20-21

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