Panel Paper: The Changing Structure of US Mortgage Markets

Saturday, November 10, 2012 : 10:35 AM
International B (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Marsha Courchane, Charles River Associates, Peter Zorn, Freddie Mac and Rajeev Darolia, University of Missouri

The Federal Housing Administration (“FHA”) offers mortgages insured by the federal government for a segment of the residential mortgage market. Its share of the market for residential mortgages declined substantially from 1997 through 2007, most significantly among minority borrowers who accounted for a growing share of subprime loans during that period. After that time, in part due to the collapse of the subprime market and in part due to tightened prime market underwriting standards, FHA mortgage loan originations have surged.

 The general pattern of declining market share in the entire nation for FHA and increasing market share for conventional prime and subprime loans held in submarkets where FHA traditionally has played a major role. FHA provided, historically, products for first time home buyers as well, often those with limited down payments available. As subprime lending has ceased for the most part, and prime lending has tightened standards, the access to funds for homeownership may increasingly become difficult for vulnerable populations. As U.S. housing markets are grappling with unprecedented changes in liquidity and credit constraints, policy solutions are being offered on an increasingly frequent basis. To better inform the policy debate, we document how markets have changed and what challenges remain for providing access to sustainable homeownership.