Post on 16-Feb-2021
THE PAUL MILSTEIN CENTER FOR REAL ESTATE
Public Policy and the Housing Recovery
By Professor Chris Mayer
Today’s outline
• Comments on Dynan, Gayer, & Plotkin • What other policies did the government pursue to
stabilize housing? • Modifications for delinquent borrowers • Provide support for GSEs/FHA to provide mortgage credit
– How successful was government support of mortgage credit?
– Takeaways for the future
DGP: Very Nice Work
• Comprehensive summary of various federal and state homebuyer assistance programs
• Variety of different estimation strategies • Conclusion: small positive, but limited effect on
demand and prices • Results make intuitive sense and are consistent with
the findings on many other government programs to help housing
05
10Ra
te
1960q1 1970q1 1980q1 1990q1 2000q1 2010q1DATE
Ownership RentalCurrent as of Quarter 1, 2013Source: US CensusUS Residential Vacancy Rates
Vacancy rate for housing is falling; Many vacant units in depressed places
Mortgage-related policies had limited effectiveness
• HAMP (Home Affordable Mortgage Program) was a victim of its own claims & bureaucracy – Targeted 3 to 4 million modifications – So far: 1.1 million permanent modifications (2.0
million temporary mods), but saved many foreclosures (Agarwal, et. al., 2013)
– Some private lenders opted out; the latest GSE programs apply to all delinquent borrowers and do not require new paperwork
– Moral hazard was much less of a problem than feared (Mayer, Morrison, & Piskorski, 2012)
Mortgage-related policies had limited effectiveness
• Government support for mortgages helped, but only for the best borrowers – For most of the last 5 years, the government has
financed more than 9 in 10 mortgages (Fannie, Freddie, and FHA)
– HARP refinancings were almost exclusively pursued by high quality borrowers until mid-2012
– Refinancings never reached levels set in previous interest rate declines
– Purchase mortgages were only available for the very best borrowers (760 FICO, 28% downpayment)
Private debt capital has disappeared; Little issuance of private MBS
020
040
060
080
0Bi
llions
of D
olla
rs
1996 1998 2000 2002 2004 2006 2008 2010 2012Year
Gross Non−Agency MBS Issuance by Year (Includes CMBS)Current as of April 2013, annualizedSource: SIFMA
© Equifax Confidential and Proprietary
US First Mortgage
First Mortgage Portfolio contraction is driven by Foreclosures, Deleveraging (payoffs & pay downs) and lower Home Buyer Demand.
US First Mortgage Portfolio
70
#LOANS
$BALANCES
$7.0
$7.5
$8.0
$8.5
$9.0
$9.5
48
49
50
51
52
53
54
55
562
00
71
0
20
07
12
20
08
02
20
08
04
20
08
06
20
08
08
20
08
10
20
08
12
20
09
02
20
09
04
20
09
06
20
09
08
20
09
10
20
09
12
20
10
02
20
10
04
20
10
06
20
10
08
20
10
10
20
10
12
20
11
02
20
11
04
20
11
06
20
11
08
20
11
10
20
11
12
20
12
02
20
12
04
20
12
06
20
12
08
20
12
10
$Trillions#MillionsEquifax
First Mortgage Portfolio Loans & Balances
Number of first mortgages drops from 55 million to 49 million
Home purchase mortgages are at levels seen in mid 1990s
Source: Mortgage Bankers Association
Even refinancing activity is well below previous peaks
Source: Mortgage Bankers Association
Origination Credit Scores are at unprecedented highs
Source: Lender Processing Services
New lending has returned for Autos, CC’s
© Equifax Confidential and Proprietary
$75.5
$52.4
$41.2$45.2 $45.0
$46.6
$59.9
$0
$10
$20
$30
$40
$50
$60
$70
$80
2006 2007 2008 2009 2010 2011 2012
$Billions EquifaxStudent Loan Origination Loan Amount Year-to-Date
$172.4
$151.7$133.3
$82.3
$109.3
$128.4$146.7
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Auto Finance Origination Loan Amount Year-To-Date
$125.1 $127.7 $121.8$106.9 $107.5
$120.0$136.3
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2006 2007 2008 2009 2010 2011 2012
$Billions EquifaxAuto Bank Origination Loan Amount Year-To-Date
US Credit Orignations
6 © Equifax Confidential and Proprietary
$75.5
$52.4
$41.2$45.2 $45.0
$46.6
$59.9
$0
$10
$20
$30
$40
$50
$60
$70
$80
2006 2007 2008 2009 2010 2011 2012
$Billions EquifaxStudent Loan Origination Loan Amount Year-to-Date
$172.4
$151.7$133.3
$82.3
$109.3
$128.4$146.7
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Auto Finance Origination Loan Amount Year-To-Date
$125.1 $127.7 $121.8$106.9 $107.5
$120.0$136.3
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
2006 2007 2008 2009 2010 2011 2012
$Billions EquifaxAuto Bank Origination Loan Amount Year-To-Date
US Credit Orignations
6
© Equifax Confidential and Proprietary
$195.9 $202.0 $196.8
$93.8$77.7
$97.2$117.9
$0
$50
$100
$150
$200
$250
$300
2006 2007 2008 2009 2010 2011 2012
$Billions EquifaxBankcard Origination Credit Limit Year-To-Date
$50.7
$61.0$56.0
$43.5$34.9 $36.6
$41.8
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Retail Card Origination Credit Limit Year-To-Date$83.3 $85.6
$72.8
$40.3$36.9
$38.1 $40.4
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Consumer Finance Origination Credit Limit Year-To-Date
$239.4
$215.5
$133.7
$59.1 $46.8 $47.1 $51.7
$0
$50
$100
$150
$200
$250
$300
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Home Equity Origination Credit Line Year-To-Date
US Credit Originations
5
© Equifax Confidential and Proprietary
$195.9 $202.0 $196.8
$93.8$77.7
$97.2$117.9
$0
$50
$100
$150
$200
$250
$300
2006 2007 2008 2009 2010 2011 2012
$Billions EquifaxBankcard Origination Credit Limit Year-To-Date
$50.7
$61.0$56.0
$43.5$34.9 $36.6
$41.8
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Retail Card Origination Credit Limit Year-To-Date$83.3 $85.6
$72.8
$40.3$36.9
$38.1 $40.4
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Consumer Finance Origination Credit Limit Year-To-Date
$239.4
$215.5
$133.7
$59.1 $46.8 $47.1 $51.7
$0
$50
$100
$150
$200
$250
$300
2006 2007 2008 2009 2010 2011 2012
$BillionsEquifax
Home Equity Origination Credit Line Year-To-Date
US Credit Originations
5
New Auto Finance
New Home Equity New Bankcard Credit
New Bank Auto Loans
Source: Equifax Credit Trends
© Equifax Confidential and Proprietary
US Bankcard
US Bankcard Originations Sub Prime Card Lenders have opened
underwriting to Sub Prime,
rebounding from the 2009-2010
pullback. Originations increases
have recently slowed as compared
to last year’s originations.
Sub Prime Card is defined by
Origination Risk Scores < 660.
16
YEAR ANNUAL %YOY YEAR TO DATE %YOY CURRENT MO %YOY
2006 27.5 - - - - - 17.2 - - - - - 2.4 - - - - -
2007 29.1 5.8% 19.8 15.1% 2.5 5.1%
2008 18.4 -36.6% 13.4 -32.1% 1.5 -38.9%
2009 7.5 -59.2% 4.8 -64.0% 0.5 -64.7%
2010 8.5 12.4% 4.8 0.2% 0.8 41.9%
2011 12.0 41.4% 7.6 56.4% 1.1 46.0%
2012 - - - - - - - - - - 7.8 2.9% 1.1 -0.3%
NUMBER OF SUB PRIME BANKCARDS (MILLIONS)
0.0
0.5
1.0
1.5
2.0
2.5
3.0
J06 J07 J08 J09 J10 J11 J12
#MillionsEquifax
Number of Bankcard Originations: Sub Prime
Subprime Bankcard (and Auto) lending has returned (FICO
Good news: Household formation is below trend…but will catch up
Thousands
Source: Census Bureau
Trendline: March 2001 to December 2007
Conclusion for housing policy
• Policy has not stabilized US housing nearly as much as it could have
• Future government actions should focus on re-establish reasonable lending standards and ground rules
• Need private capital, but in a sustainable way with countercyclical credit support
• Rental market for single-family homes is growing, but is not a long-run solution