Temporary Loan Limits As a Natural Experiment in Federal Housing Administration Insurance
Posted: 18 Nov 2016
Date Written: November 2016
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.
Keywords: Federal Housing Administration, housing finance, mortgage, mortgage insurance
JEL Classification: G22, G28, R3, R38, R51
Suggested Citation: Suggested Citation