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A Quarter Century of Mortgage Risk

Author

Listed:
  • Morris A Davis
  • William D Larson
  • Stephen D Oliner
  • Benjamin R Smith

Abstract

This article provides a comprehensive history of default risk for newly originated home mortgages in the USA over the past quarter century. The loan-level source data include the entire guarantee book for Fannie Mae and Freddie Mac. We track many loan characteristics and produce a summary measure of risk. Among our many results, we show that mortgage risk had already risen in the 1990s, planting seeds of the financial crisis well before the actual event. Our results also cast doubt on explanations of the crisis that focus on borrowers with low credit scores. The aggregate series are available for download at https://www.fhfa.gov/papers/wp1902.aspx.

Suggested Citation

  • Morris A Davis & William D Larson & Stephen D Oliner & Benjamin R Smith, 2023. "A Quarter Century of Mortgage Risk," Review of Finance, European Finance Association, vol. 27(2), pages 581-618.
    • Handle: RePEc:oup:revfin:v:27:y:2023:i:2:p:581-618.
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    File URL: http://hdl.handle.net/10.1093/rof/rfac034
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    References listed on IDEAS

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    Cited by:

    1. William D. Larson & Andrew B. Martinez, 2024. "House Prices, Debt Burdens, and the Heterogeneous Effects of Mortgage Rate Shocks," Working Papers 2024-002, The George Washington University, Department of Economics, H. O. Stekler Research Program on Forecasting.

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    More about this item

    Keywords

    Mortgage risk; Housing boom; Default; Foreclosure; House price; Leverage;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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