How Mortgage Finance Reform Could Affect Housing
American Economic Review
vol. 106,
no. 5, May 2016
(pp. 620-24)
Abstract
Although major changes in mortgage finance have occurred since the subprime bust, several issues remain unresolved, centering on the roles of Fannie Mae, Freddie Mac, and the FHA. We analyze how some reforms might affect house prices in a framework rich enough to simulate the impact of several reforms which change mortgage interest rates and/or loan-to-value (LTV) ratios of first time home buyers, the key drivers of house prices in recent decades. Simulations suggest that ending the GSE interest rate subsidy would have small effects, while changes in capital requirements or maximum FHA loan size limits would have larger effects.Citation
Duca, John V., John Muellbauer, and Anthony Murphy. 2016. "How Mortgage Finance Reform Could Affect Housing." American Economic Review, 106 (5): 620-24. DOI: 10.1257/aer.p20161083Additional Materials
JEL Classification
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G28 Financial Institutions and Services: Government Policy and Regulation
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G38 Corporate Finance and Governance: Government Policy and Regulation
- R21 Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
- R31 Housing Supply and Markets