Reassessing FHA Risk

28 Pages Posted: 8 Mar 2010 Last revised: 8 Sep 2015

See all articles by Diego F. Aragon

Diego F. Aragon

affiliation not provided to SSRN

Andrew Caplin

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Sumit Chopra

New York University (NYU)

John V. Leahy

New York University (NYU) - Department of Economics; National Bureau of Economic Research (NBER)

Yann LeCun

New York University & Facebook AI Research

Marco Scoffier

New York University (NYU)

Joseph S. Tracy

Federal Reserve Bank of New York; National Bureau of Economic Research (NBER)

Date Written: March 2010

Abstract

Federal Housing Administration (FHA) insurance has doubled over the past two years and is projected to redouble to $1.5 trillion over the next five. Despite clear signs of strain in the FHA's Mutual Mortgage Insurance Fund, a recent actuarial review indicates that the FHA will not need any form of government support. We identify four risk factors that make such a funding request more likely; the review underestimates how many FHA borrowers are underwater and in economic distress; it uses measures of house values that lower loss estimates; it does not incorporate early-warning signals of future losses that are available from mortgage delinquency; and it ignores potential risks associated with recent down-payment assistant programs despite higher losses on previous programs of this type. We propose measures that could be taken to improve the predictive accuracy of FHA risk assessment.

Suggested Citation

Aragon, Diego F. and Caplin, Andrew and Chopra, Sumit and Leahy, John V. and LeCun, Yann and Scoffier, Marco and Tracy, Joseph, Reassessing FHA Risk (March 2010). NBER Working Paper No. w15802. Available at SSRN: https://ssrn.com/abstract=1565962

Diego F. Aragon (Contact Author)

affiliation not provided to SSRN

Andrew Caplin

New York University (NYU) - Department of Economics ( email )

269 Mercer Street
New York, NY 10003
United States
212-998-8950 (Phone)
212-995-3932 (Fax)

HOME PAGE: http://www.econ.nyu.edu/user/caplina/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sumit Chopra

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

John V. Leahy

New York University (NYU) - Department of Economics ( email )

269 Mercer Street, 7th Floor
New York, NY 10011
United States
212-992-9770 (Phone)
212-995-4186 (Fax)

HOME PAGE: http://www.nyu.edu/fas/Faculty/LeahyJohn.html

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yann LeCun

New York University & Facebook AI Research ( email )

60 Fifth Avenue
Room 516
New York, NY 10011
United States
2129983283 (Phone)

HOME PAGE: http://yann.lecun.com

Marco Scoffier

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Joseph Tracy

Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States
212-720-6344 (Phone)
212-720-2630 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
778
PlumX Metrics