How Mortgage Finance Affects the Urban Landscape

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThis chapter considers the structure of mortgage finance in the U.S., and its role in shaping patterns of homeownership, the nature of the housing stock, and the organization of residential activity. We start by providing some background on the design features of mortgage contracts that distinguish them from other loans, and that have important implications for issues presented in the rest of the chapter. We then explain how mortgage finance interacts with public policy, particularly tax policy, to influence a household's decision to own or rent, and how shifts in the demand for owner-occupied housing are translated into housing prices and quantities, given the unusual nature of housing supply. We consider the distribution of mortgage credit in terms of access and price, by race, ethnicity, income, and over the lifecycle, with particular attention to the role of recent innovations such as non-prime mortgage securitization and reverse mortgages. The extent of negative equity has been unprecedented in the past decade, and we discuss its impact on strategic default, housing turnover, and housing investment. We describe spatial patterns in foreclosure and summarize the evidence for foreclosure spillovers in urban neighborhoods. Finally, we offer some thoughts on future innovations in mortgage finance. How Mortgage Finance Affects the Urban LandscapeOver 80 percent of Americans live in metropolitan areas, and housing is the dominant land use in cities. For many Americans, homeownership is an important goal, and a substantial majority of the population, including renters, believes that homeownership is a good way to improve their financial situation (Fannie Mae, 2013). For many owners, and for the great majority of renters, purchasing a home will mean obtaining a mortgage. For this reason, the availability and form of mortgages is an important determinant of the homeownership rate, which in turn affects the nature of the housing stock and the organization of residential activity within and across metropolitan areas.In this chapter, we consider the literature on mortgage finance in the U.S. and its role in shaping the urban landscape. The 2000s witnessed an enormous boom/bust cycle in the residential real estate market, followed by the sharpest contraction in the overall economy since the 1930s.These events, which are widely thought to have been driven at least in part by the mortgage market, had a pronounced spatial pattern ...

To Securitize or to Price Credit Risk?

“…This rate difference is referred to as the rate spread in the Home Mortgage Disclosure Act (HMDA) database. Following Purnanandam (2010), Chan, Haughwout, and Tracy (2015), Ferreira and Gyourko (2015), Antoniades (2016), andBayer et al (2018), we classify a subprime loan as one with a rate spread greater than or equal to 3%.…”

“…10 HMDA provides an indicator that shows whether a loan is a jumbo or nonjumbo loan. We follow the classification method of Purnanandam (2010), Chan et al (2015), Ferreira and Gyourko (2015), Antoniades (2016), andBayer et al (2018) and identify subprime loans as those with an interest rate of 3% and above the APOR (the rate spread).…”

Mortgage Lenders and the Geographic Concentration of Foreclosures

“…14 The Annual Percentage Rate (APR) estimates cost of credit including interest rate and closing costs. These high cost or rate spread loans are sometimes referred to as subprime loans (Mayer and Pence 2009;Chan, Haughwout and Tracy 2015), but other authors study the subprime market based on a list of top subprime lenders, e.g. Ferreira and Gyourko (2015), based on borrowers who have a low credit score, e.g.…”

Foreclosure Spillovers within broad Neighborhoods

“…2 A related literature examines the concentration of high cost lending and foreclosure in disadvantaged and minority neighborhoods. For recent examples see Ghent, Hernández-Murillo, and Owyang (2014), Chan, Gedal, Been and Haughwout (2013), Chan, Haughwout and Tracy (2015), andRoss (2016, 2017). 3 Bayer, Ross and Topa (2008) argue that thin housing markets and limited information on micro neighborhoods make it difficult for households to systematically sort into specific houses or residential blocks conditional on broader neighborhoods, and support this assertion empirically with balancing tests.…”