The Role of Government and Private Institutions in Credit Cycles in the U.S. Mortgage Market

58 Pages Posted: 16 Jun 2020 Last revised: 23 Nov 2020

See all articles by Manuel Adelino

Manuel Adelino

Duke University; Duke Innovation & Entrepreneurship Initiative; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

W. Ben McCartney

Purdue University - Krannert School of Management

Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Date Written: July 28, 2020

Abstract

The distribution of combined loan-to-value ratios (CLTVs) for purchase mortgages has been remarkably stable in the U.S. over the last 25 years. But the source of high-CLTV loans changed during the housing boom of the 2000s, with private securitization replacing FHA and VA loans directly guaranteed by the government. This substitution holds within ZIP codes, properties, and borrower types. Furthermore, the two groups exhibit similar delinquency rates. These findings suggest that high-CLTV mortgages are a constant feature of the U.S. housing market and are used by similar borrowers over time, but that their source varies with the mortgage cycle.

Keywords: Household Finance, Mortgages, Loan-to-Value Ratios, Government Guarantee, Collateral Rates

JEL Classification: D30, E3, G21, G28, R30

Suggested Citation

Adelino, Manuel and McCartney, W. Ben and Schoar, Antoinette, The Role of Government and Private Institutions in Credit Cycles in the U.S. Mortgage Market (July 28, 2020). Available at SSRN: https://ssrn.com/abstract=3608150 or http://dx.doi.org/10.2139/ssrn.3608150

Duke Innovation & Entrepreneurship Initiative ( email )

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National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

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W. Ben McCartney

Purdue University - Krannert School of Management ( email )

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Antoinette Schoar

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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United States
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617-258-6855 (Fax)

National Bureau of Economic Research (NBER) ( email )

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