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41 Conn. L. Rev. 1143 (2008-2009)
Industry Changes in the Market for Mortgage Loans

handle is hein.journals/conlr41 and id is 1151 raw text is: CONNECTICUT LAW REVIEW VOLUME 41 MAY 2009 NUMBER 4 Article Industry Changes in the Market for Mortgage Loans DR. MARSHA COURCHANE, RAJEEV DAROLIA & DR. PETER ZORN The Federal Housing Administration (FHA) offers mortgages insured by the federal government to a segment of the residential mortgage market. Its share of the market for residential mortgages declined substantially from 1997 through 2007, most significantly among minority borrowers who accounted for a growing share of subprime loans during that period After that time, in part due to the collapse of the subprime market and in part due to tightened prime market underwriting standards, FHA mortgage loan originations have surged. During the same 11-year period, the general pattern of declining market share in the entire nation for FHA and increasing market share for conventional prime and subprime loans held in submarkets where FHA traditionally has played a major role. The drop in FHA's market share was particularly large among Hispanic borrowers, and both African Americans and Hispanics had increased shares of subprime loans over this period FHA provided, historically, products for first time home buyers as well, often those with limited down payments available. As subprime lending has ceased for the most part, and prime lending has tightened standards, the access to funds for homeownership may increasingly become difficult for vulnerable populations. As U.S. housing markets are grappling with unprecedented changes in liquidity and credit constraints, policy solutions are being offered on an increasingly frequent basis. Some of those policy solutions focus on whether or not FHA lending with Ginnie Mae securitization could supplant the current roles served by Fannie Mae and Freddie Mac with their securitizations of conventional, conforming loans. To better inform the policy debate, we document how markets have changed and what challenges remain for providing access to sustainable homeownership.

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