Long-term Outcomes of FHA First-time Homebuyers

25 Pages Posted: 28 Feb 2018

See all articles by Donghoon Lee

Donghoon Lee

Federal Reserve Bank of New York; New York University

Joseph S. Tracy

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

Multiple version iconThere are 2 versions of this paper

Date Written: February , 2018


The Federal Housing Administration (FHA) has stated that its goal is to foster sustainable homeownership. In this paper, we propose some metrics for evaluating the degree to which the FHA is attaining this goal for first-time homebuyers. This work uses New York Fed Consumer Credit Panel data to examine the long-term outcome for households that make the transition from renting to owning using an FHA-insured mortgage. In addition to calculating the fraction of these borrowers whose FHA homeownership experience ends in default, we measure the degree to which these borrowers successfully remain homeowners after paying off their credit risk to the FHA. For the 2001 and 2002 cohorts, which were less impacted by the financial crisis than later cohorts, we find that 12 percent had their homeownership experience end in default while around 55 percent sustained their homeownership without the need for an FHA mortgage. Another 20 percent are either in their original home or have moved but continue to use an FHA mortgage.

Keywords: FHA mortgages, first-time homebuyers, Federal Housing Administration

JEL Classification: G21, G28, R31

Suggested Citation

Lee, Donghoon and Tracy, Joseph, Long-term Outcomes of FHA First-time Homebuyers (February , 2018). FRB of New York Staff Report No. 839, Available at SSRN: https://ssrn.com/abstract=3131099 or http://dx.doi.org/10.2139/ssrn.3131099

Donghoon Lee (Contact Author)

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Joseph Tracy

National Bureau of Economic Research (NBER) ( email )

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Federal Reserve Bank of Dallas ( email )

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