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

58 Pages Posted: 9 Oct 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

affiliation not provided to SSRN

Antoinette Schoar

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

Multiple version iconThere are 2 versions of this paper

Date Written: October, 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 credit expanded predominantly through the increase in asset values rather than a relaxation of CLTV constraints, which supports models of the collateral channel or broad changes in house price expectations.

Keywords: Household Finance, Mortgages, Loan-to-Value Ratios, Government Guarantees, 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 (October, 2020). Available at SSRN: https://ssrn.com/abstract=3707088 or http://dx.doi.org/10.21799/frbp.wp.2020.40

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

affiliation not provided to SSRN

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Antoinette Schoar

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

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Cambridge, MA 02142
United States
617-253-3763 (Phone)
617-258-6855 (Fax)

National Bureau of Economic Research (NBER) ( email )

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