[PDF] Temporary Loan Limits As A Natural Experiment In Fha Insurance eBook

Author : Kevin Park
Publisher :
Page : 12 pages
File Size : 45,52 MB
Release : 2017
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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.

Author : Kevin A. Park
Publisher :
Page : pages
File Size : 50,30 MB
Release : 2016
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The Economic Stimulus Act of 2008 dramatically but temporarily increased the mortgage loan amount eligible for insurance through the Federal Housing Administration (FHA). We use the implementation and expiration of these loan limits as a source of exogenous variation in the availability of FHA insurance to measure the impact on the overall mortgage market and conventional lending. We find that the introduction of higher loan limits increased the number of loan originations, but that the expiration of those loan limits roughly 6 years later did not significantly decrease affected loan originations. The substitution between loan products and small net impact on the overall mortgage market when the ESA loan limits expired may be explained by the return of a stronger conventional lending industry than existed during the housing crisis.

Author : Min Hwang
Publisher :
Page : 57 pages
File Size : 31,14 MB
Release : 2017
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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 : Brian Greul
Publisher :
Page : 1036 pages
File Size : 40,66 MB
Release : 2021-06-18
Category :
ISBN : 9781954285330

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The Doing Business with FHA section in this FHA Single Family Housing Policy Handbook (SF Handbook) covers Federal Housing Administration (FHA) approval and eligibility requirements for both Title I lenders and Title II Mortgagees, as well as other FHA program participants. The term "Mortgagee" is used throughout for all types of FHA approval (both Title II Mortgagees and Title I lenders) and the term "Mortgage" is used for all products (both Title II Mortgages and Title I loans), unless otherwise specified.