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The Riskiness of Outstanding Mortgages in the United States, 1999 - 2019

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  • William D. Larson

    (Federal Housing Finance Agency)

Abstract

This paper introduces summary measures of credit risk for the stock of all outstanding mortgages in the United States for each quarter between 1999 and 2019. Mortgage terminations play a fundamental role in offsetting risk introduced by the flow of new originations because of refinance activity and the often dual nature of home buyers as concurrent sellers. To illustrate these concepts in a policy setting, I show the Home Affordable Refinance Program increased origination risk metrics but reduced overall risk due to the associated terminations of even riskier loans. Generally, book-level risk tends to lag behind originations: while origination risk peaked in 2006, the risk of outstanding mortgages peaked in 2007, and while origination risk bottomed out in 2011 and has been rising since, book-level risk continued its downward trend in 2019. Other results highlight previously rarely-examined market segments, including credit unions, the Federal Home Loan Bank system, and loans guaranteed by the Farm Service Agency/Rural Housing Service.

Suggested Citation

  • William D. Larson, 2021. "The Riskiness of Outstanding Mortgages in the United States, 1999 - 2019," FHFA Staff Working Papers 21-03, Federal Housing Finance Agency.
    • Handle: RePEc:hfa:wpaper:21-03
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    File URL: https://www.fhfa.gov/sites/default/files/documents/wp2103.pdf
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    File URL: https://www.fhfa.gov/research/papers/wp2103
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    References listed on IDEAS

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    Cited by:

    1. William D. Larson & Christos Makridis & Chad Redmer, 2021. "Borrower Expectations and Mortgage Performance: Evidence from the COVID-19 Pandemic," FHFA Staff Working Papers 21-02, Federal Housing Finance Agency.

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    More about this item

    Keywords

    mortgage risk; systemic risk; housing cycles; stress test;
    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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