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Mortgage Risk Since 1990

Author

Listed:
  • Morris A. Davis

    (Department of Finance and Economics, Rutgers Business School, Rutgers University)

  • William D. Larson

    (Federal Housing Finance Agency)

  • Stephen D. Oliner

    (American Enterprise Institute for Public Policy Research)

  • Benjamin Smith

    (American Enterprise Institute for Public Policy Research)

Abstract

This paper provides a comprehensive account of the evolution of default risk for newly originated home purchase loans since 1990. We bring together several data sources to produce this history, including loan-level data for the entire Enterprise (Fannie Mae and Freddie Mac) book. We use these data to track a large number of loan characteristics and a summary measure of risk, the stressed default rate. Among the many results in the paper, we show that mortgage risk had already risen in the 1990s, planting the seeds of the financial crisis well before the actual event. Our results also cast doubt on explanations of the crisis that focus on low-credit-score borrowers.

Suggested Citation

  • Morris A. Davis & William D. Larson & Stephen D. Oliner & Benjamin Smith, 2019. "Mortgage Risk Since 1990," FHFA Staff Working Papers 19-02, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:19-02
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    mortgage risk; housing boom; default; foreclosure; house price; leverage;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • 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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