William B. McCartney
403 West State Street
West Lafayette, IN 47907
Institutional Affiliation: Purdue University
NBER Working Papers and Publications
|July 2020||The Role of Government and Private Institutions in Credit Cycles in the U.S. Mortgage Market|
with , : w27499
We show that the distribution of combined loan-to-value ratios (CLTVs) for purchase mortgages in the U.S. has been remarkably stable over the last 25 years. But there was a dramatic shift during the housing boom of the 2000s in the provision of high- CLTV loans through private sources, which replaced almost one-for-one the share of high-CLTV loans directly guaranteed by the government, via FHA and VA. Post 2008, FHA/VA loans increased back to 30% of all purchase mortgages. This substitution between government and privately backed high-CLTV loans holds within ZIP codes, properties and borrower types over the full sample period. We also show that the increase in private high-CLTV lending follows local house price increases rather than preceding them. These findings suggest that the housing b...