41 Conn. L. Rev. 1143 (2008-2009)
Industry Changes in the Market for Mortgage Loans; Courchane, Marsha; Darolia, Rajeev; Zorn, Peter

handle is hein.journals/conlr41 and id is 1151 raw text is: CONNECTICUT
VOLUME 41                     MAY 2009                       NUMBER 4
Industry Changes in the Market for Mortgage Loans
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

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