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Working Paper
Equilibrium Evictions
Corbae, Dean; Glover, Andrew; Nattinger, Michael (2023-04-21)
We develop a simple equilibrium model of rental markets for housing in which eviction occurs endogenously. Both landlords and renters lack commitment; a landlord evicts a delinquent tenant if they do not expect total future rent payments to cover costs, while tenants cannot commit to paying more rent than they would be able or willing to pay given their outside option of searching for a new house. Renters who are persistently delinquent are more likely to be evicted and pay more per quality-adjusted unit of housing than renters who are less likely to be delinquent. Evictions are never ...
Research Working Paper , Paper RWP 23-03

Working Paper
Risk Perception and Loan Underwriting in Securitized Commercial Mortgages
Firestone, Simon; Godin, Nathan Y.; Horvath, Akos; Sagi, Jacob (2024-04-10)
We use model-implied volatility to proxy for property risk perceptions in the commercial real estate lending market. Although loan-to-value ratios (LTVs) unconditionally decreased following the Global Financial Crisis, LTVs conditioned on implied volatility and other theoretically motivated fundamental determinants of optimal leverage show no conclusive trend before or after the crisis. Taking reported property and loan attributes at face value, we find no clear pattern of unwarranted credit being extended to commercial real estate assets. We conclude that systematically higher LTV decisions ...
Finance and Economics Discussion Series , Paper 2024-019

Working Paper
Do Minimum Wage Increases Benefit Intended Households? Evidence from the Performance of Residential Leases
Ambrose, Brent W.; Diop, Moussa; Agarwal, Sumit (2019-07-10)
Prior studies debating the e?ects of changes to the minimum wage concentrate on impacts on household income and spending or employment. We extend this debate by examining the impact of changes to the minimum wage on expenses associated with shelter, a previously unexplored area. Increases in state minimum wages signi?cantly reduce the incidence of renters defaulting on their lease contracts by 1.29 percentage points over three months, relative to similar renters who did not experience an increase in the minimum wage. This represents 25.7% fewer defaults post treatment in treated states. To ...
Working Papers , Paper 19-28

Working Paper
Improving the 30-Year Fixed-Rate Mortgage
von Hafften, Alexander H.; Passmore, Wayne (2017-08-25)
The 30-year fixed-rate fully amortizing mortgage (or "traditional fixed-rate mortgage") was a substantial innovation when first developed during the Great Depression. However, it has three major flaws. First, because homeowner equity accumulates slowly during the first decade, homeowners are essentially renting their homes from lenders. With so little equity accumulation, many lenders require large down payments. Second, in each monthly mortgage payment, homeowners substantially compensate capital markets investors for the ability to prepay. The homeowner might have better uses for this ...
Finance and Economics Discussion Series , Paper 2017-090

Working Paper
The impact of the home valuation code of conduct on appraisal and mortgage outcomes
Nakamura, Leonard I.; Ding, Lei (2014-08-01)
Superseded by Working Paper 15-28. During the housing crisis, it came to be recognized that inflated home mortgage appraisals were widespread during the subprime boom. The New York State Attorney General?s office investigated this issue with respect to one particular lender and Fannie Mae and Freddie Mac. The investigation resulted in an agreement between the Attorney General?s office, the government-sponsored enterprises (GSEs), and the Federal Housing Finance Agency (the GSEs? federal regulator) in 2008, in which the GSEs agreed to adopt the Home Valuation Code of Conduct (HVCC). Using ...
Working Papers , Paper 14-23

Newsletter
Expirations and Early Exits of LIHTC Units: Implications for the Affordable Housing Stock
Jaffe, Maxwell; Ingram, Dustin (2025-10)
The Low-Income Housing Tax Credit (LIHTC) is the nation’s largest source of financing for the development and preservation of affordable rental housing. The program provides tax credits to developers that may cover a portion of their acquisition, construction, and rehabilitation costs. In exchange for these credits, developers must ensure affordability for tenants whose earnings are at or below specific percentages of the area median income (AMI) with rental rates that do not exceed 30% of their gross income. LIHTC affordability requirements last for 30 years at a minimum. The earliest ...
Chicago Fed Letter , Volume 514 , Pages 10

Journal Article
Trends in home purchase lending: consolidation and the Community Reinvestment Act
Canner, Glenn B.; Calem, Paul S.; Bostic, Raphael W.; Avery, Robert B. (1999-02)
Consolidation among banking institutions has substantially changed the structure of the banking industry. Between 1975 and 1997, the number of commercial banks and savings associations declined more than 40 percent. Over the same broad period, the market for home mortgage lending has also changed substantially. Notably, home mortgage lending is no longer primarily the province of banking institutions operating in the communities in which they have banking offices. In recent decades, mortgage and finance companies and banking organizations operating outside their local communities have gained ...
Federal Reserve Bulletin , Volume 85 , Issue Feb

Journal Article
The FHA and the GSEs as countercyclical tools in the mortgage markets
Sherlund, Shane M.; Passmore, Wayne (2018-24-03)
The authors examine the connection between government mortgage programs and economic outcomes during and after the financial crisis. They find a strong correlation between counties that participated more heavily in Federal Housing Administration (FHA)/Veterans Affairs (VA) and government-sponsored enterprise (GSE) mortgage lending before the crisis and better economic outcomes during and after the crisis. Although the financial crisis was a substantial shock to all counties, those more reliant on FHA/VA or GSE lending experienced smaller increases in unemployment rates; smaller declines in ...
Economic Policy Review , Issue 24-3 , Pages 28-40

Discussion Paper
Evaluating the Benefits of a Streamlined Refinance Program
Willen, Paul S.; Gerardi, Kristopher S.; Loewenstein, Lara (2020-06-25)
Mortgage borrowers who have experienced employment disruptions as a result of theCOVID-19 pandemic are unable to refinance their loans to take advantage of historically low market rates. In this article, we analyze the effects of a streamlined refinance (“refi”) program for government-insured loans that would allow borrowers to refinance without needing to document employment or income. In addition, we consider a cash-out component that would allow borrowers to extract some of the substantial amount of housing equity that many have accumulated in recent years.
Policy Hub , Paper 2020-8

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