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Working Paper
“Don’t Know What You Got Till It’s Gone”—The Community Reinvestment Act in a Changing Financial Landscape
Nakamura, Leonard I.; Ding, Lei (2020-02-20)
This study provides new evidence on the impact of the Community Reinvestment Act (CRA) on mortgage lending by taking advantage of an exogenous policy shock in 2014, which caused significant changes in neighborhoods’ CRA eligibility in the Philadelphia market. The loss of CRA coverage leads to an over 10 percent decrease in purchase originations by CRA-regulated lenders. While nondepository institutions replace approximately half, but not all, of the decreased lending, their increased market share was accompanied by a greater involvement in riskier and more costly FHA lending. This study ...
Working Papers , Paper 20-08

Report
The role of technology in mortgage lending
Schnabl, Philipp; Vickery, James; Fuster, Andreas; Plosser, Matthew (2018-02-01)
Technology-based (?FinTech?) lenders increased their market share of U.S. mortgage lending from 2 percent to 8 percent from 2010 to 2016. Using market-wide, loan-level data on U.S. mortgage applications and originations, we show that FinTech lenders process mortgage applications about 20 percent faster than other lenders, even when controlling for detailed loan, borrower, and geographic observables. Faster processing does not come at the cost of higher defaults. FinTech lenders adjust supply more elastically than other lenders in response to exogenous mortgage demand shocks, thereby ...
Staff Reports , Paper 836

Working Paper
“Don't Know What You Got Till It’s Gone” — The Effects of the Community Reinvestment Act (CRA) on Mortgage Lending in the Philadelphia Market
Nakamura, Leonard I.; Ding, Lei (2017-06-22)
The Community Reinvestment Act (CRA), enacted in 1977, has served as an important tool to foster access to financial services for lower-income communities across the country. This study provides new evidence on the effectiveness of CRA on mortgage lending by focusing on a large number of neighborhoods that became eligible and ineligible for CRA credit in the Philadelphia market because of an exogenous policy shock in 2014. The CRA effects are more evident when a lower-income neighborhood loses its CRA coverage, which leads to a 10 percent or more decrease in purchase originations by ...
Working Papers , Paper 17-15

Discussion Paper
Just Released: Who's Borrowing Now? The Young and the Riskless!
Lee, Donghoon; Haughwout, Andrew F.; Yun, David; Van der Klaauw, Wilbert (2014-02-18)
According to today’s release of the New York Fed’s 2013:Q4 Household Debt and Credit Report, aggregate consumer debt increased by $241 billion in the fourth quarter, the largest quarter-to-quarter increase since 2007. More importantly, between 2012:Q4 and 2013:Q4, total household debt rose $180 billion, marking the first four-quarter increase in outstanding debt since 2008. As net household borrowing resumes, it is interesting to see who is driving these balance changes, and to compare some of today’s patterns with those of the boom period.
Liberty Street Economics , Paper 20140218b

Interest rate volatility contributed to higher mortgage rates in 2022
Frame, W. Scott; McCormick, Matthew (2023-04-04)
The Federal Reserve aggressively tightened monetary policy in 2022, responding to high and persistent inflation. The resulting borrowing cost increase for households and firms was generally anticipated. However, fixed-rate mortgage interest rates were especially sensitive to the policy regime change.
Dallas Fed Economics

Working Paper
Reverse mortgage loans: a quantitative analysis
Nakajima, Makoto; Telyukova, Irina A. (2014-09-08)
Supersedes Working Paper 13-27. Reverse mortgage loans (RMLs) allow older homeowners to borrow against housing wealth without moving. Despite growth in this market, only 2.1% of eligible homeowners had RMLs in 2011. In this paper, the authors analyze reverse mortgages in a calibrated life-cycle model of retirement. The average welfare gain from RMLs is $885 per homeowner. The authors? model implies that low-income, low-wealth, and poor-health households benefit the most, consistent with empirical evidence. Bequest motives, nursing-home-move risk, house price risk, and loan costs all ...
Working Papers , Paper 14-27

Working Paper
Household Financial Distress and the Burden of 'Aggregate' Shocks
Athreya, Kartik B.; Sanchez, Juan M.; Mather, Ryan; Mustre-del-Rio, Jose (2020-09-15)
The goal of this paper is to show that household-level financial distress (FD) varies greatly, meaning there is unequal exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three facts: (i) regions in the U.S. vary significantly in their "FD-intensity," measured either by how much additional credit households therein can access, or in how delinquent they typically are on debts, (ii) shocks that are typically viewed as "aggregate" in nature hit geographic areas quite differently, and (iii) FD is an economic "pre-existing ...
Working Paper , Paper 20-12

Discussion Paper
Uneven Distribution of Household Debt by Gender, Race, and Education
Chakrabarti, Rajashri; Chatterji-Len, Kasey; Avtar, Ruchi (2021-11-17)
Household debt has risen markedly since 2013 and amounts to more than $15 trillion dollars. While the aggregate volume of household debt has been well-documented, literature on the gender, racial and education distribution of debt is lacking, largely because of an absence of adequate data that combine debt, demographic, and education information. In a three-part series beginning with this post, we seek to bridge this gap. In this first post, we focus on differences in debt holding behavior across race and gender. Specifically, we explore gender and racial disparities in different types of ...
Liberty Street Economics , Paper 20211117a

Journal Article
GSE guarantees, financial stability, and home equity accumulation
Passmore, Wayne; von Hafften, Alexander H. (2018-24-03)
Before 2008, the government?s ?implicit guarantee? of the securities issued by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac led to practices by these institutions that threatened financial stability. In 2008, the Federal Housing Finance Agency placed these GSEs into conservatorship. Conservatorship was intended to be temporary but has now reached its tenth year, and policymakers continue to weigh options for reform. In this article, the authors assess both implicit and explicit government guarantees for the GSEs. They argue that adopting a legislatively defined ...
Economic Policy Review , Issue 24-3 , Pages 11-27

Discussion Paper
The Great Pandemic Mortgage Refinance Boom
Mangrum, Daniel; Lee, Donghoon; Scally, Joelle; Haughwout, Andrew F.; Van der Klaauw, Wilbert (2023-05-15)
Total debt balances grew by $148 billion in the first quarter of 2023, a modest increase after 2022’s record growth. Mortgages, the largest form of household debt, grew by only $121 billion, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. The increase was tempered by a sharp reduction in both purchase and refinance mortgage originations. The pandemic boom in purchase originations was driven by many factors – low mortgage rates, strong household balance sheets, and an increased demand for housing. Homeowners ...
Liberty Street Economics , Paper 20230515b

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