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How Mortgage Finance Reform Could Affect Housing

John V. Duca¹; John Muellbauer²; Anthony Murphy³

¹ Federal Reserve Bank of Dallas, 2200 N. Pearl Street, Dallas, TX 75201, and Southern Methodist University, Dallas, TX 75205 (e-mail: ) · ² INET Oxford, Oxford Martin School, University of Oxford, Eagle House, Walton Well Road, Oxford OX2 6ED, UK, and Nuffield College, New Road, Oxford OX1 1NF, UK (e-mail: ) · ³ Murphy: Federal Reserve Bank of Dallas, 2200 N. Pearl Street, Dallas, TX 75201, and Southern Methodist University, Dallas, TX 75205 (e-mail: )

Although major changes in mortgage finance have occurred since the subprime bust, several issues remain unresolved, centering on the roles of Fannie Mae, Freddie Mac, and the FHA. We analyze how some reforms might affect house prices in a framework rich enough to simulate the impact of several reforms which change mortgage interest rates and/or loan-to-value (LTV) ratios of first time home buyers, the key drivers of house prices in recent decades. Simulations suggest that ending the GSE interest rate subsidy would have small effects, while changes in capital requirements or maximum FHA loan size limits would have larger effects.

DOI

10.1257/aer.p20161083

Volume

106 (5)

Pages

620-624

Language

en

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