[PDF] Raising The Fha Mortgage Limit eBook

Author : Min Hwang
Publisher :
Page : 57 pages
File Size : 16,92 MB
Release : 2017
Category :
ISBN :

GET BOOK

This paper examines the impacts of changes in the Federal Housing Administration (FHA) insured loan limit in response to the Economic Stimulus Act (ESA) of 2008. We use difference-in-difference approaches to compare the number of transactions and average loan-to-value ratios for properties located in high-cost areas and low-cost areas, before and after the ESA policy change. We find that the increase in loan limits does results larger demand for FHA loans, both in quantity and quality. However, the behavior is not driven by incentives to buy more housing or by wealth constraints. We find evidence of increased moral hazard in the sense that increased loan limits induced riskier borrowers (allowed “cherry-picking” against FHA), and that much of the increased demand for FHA loans came at the expense of other loans. For instance, newly qualified borrowers, especially via cash-out refinance loans, are more likely to take advantage of increased loan limit policy, and adjust their LTVs. Also, newly qualified loans had higher default rates and higher loss given default rate.

Author : U S Government Accountability Office (G
Publisher : BiblioGov
Page : 42 pages
File Size : 44,11 MB
Release : 2013-06
Category :
ISBN : 9781289134907

GET BOOK

Pursuant to a legislative requirement, GAO reviewed the methodology that the Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac) uses to adjust the conforming loan limit, focusing on: (1) the effect of using alternative adjustment methods on the loan limit; (2) the implications of Fannie Mae's and Freddie Mac's decision to maintain the 1993 loan limit for 1994; and (3) how data users view the accuracy of the Finance Board's price data. GAO found that: (1) using alternative methods for adjusting the mortgage loan limit would not have substantially changed the 1993 loan limit or the share of the conventional mortgage market that would fall within the conforming loan limit; (2) of the four alternatives tested, three did not change the loan limit by more than 7 percent of the 1993 limit; (3) the alternative adjustment method that used actual home prices as its basis changed the loan limit by more than 14 percent; (4) 93 percent of all conventional loans were at or below the actual conforming limit in 1993; (5) the decision to maintain the 1993 loan limit in 1994 is legislatively authorized, should allow both companies to serve the same share of the mortgage market, and should ease potential disruption to lenders; (6) maintaining the 1993 conforming loan limit may lower some borrowers' interest rates; (7) the 1995 loan limit may be adjusted upward because the legislation requires that adjustments be made annually; (8) an upwardly biased loan limit could lower some borrowers' interest rates, increase the number of loans available for purchase, decrease the number of jumbo loans, and affect Federal Housing Administration (FHA) loan limits if FHA loan limits are indexed to the conforming loan limit; (9) most data users find the Finance Board's data to be generally accurate; and (10) the Finance Board is the only comprehensive source of national data on housing price changes for new and existing homes.

Author : Kevin Park
Publisher :
Page : 12 pages
File Size : 15,59 MB
Release : 2017
Category :
ISBN :

GET BOOK

Section 203 of the National Housing Act of 1934 created the Federal Housing Administration (FHA) to provide federally backed insurance of home mortgages against the risk of default. FHA insurance typically serves borrowers with higher perceived credit risk, including first-time homebuyers and minority borrowers. FHA is also restricted to loan amounts less than a maximum limit. Historically, these loan limits have tended to not keep pace with house price appreciation, further focusing FHA insurance on a narrowing segment of the mortgage market. But in response to the collapse of house prices and rising foreclosures, Congress enacted legislation in 2008 that drastically increased the maximum loan amount eligible for FHA insurance. Although subsequently extended, the higher loan limits expired at the end of 2013. The changes in loan limits create a natural experiment to measure the effect of the availability of FHA mortgage insurance on the mortgage market. The exogenous variation in FHA eligibility provides an improvement over previous research on the substitution between FHA and conventional (i.e., not insured by the Veterans Administration, Department of Agriculture, or FHA) mortgage lending.