The Role of Government and Private Institutions in Credit Cycles in the U.S. Mortgage Market

The distribution of combined loan-to-value ratios (CLTVs) for purchase mortgages has been remarkably stable in the U.S. over the last 25 years. But the source of high-CLTV loans changed during the housing boom of the 2000s, with private securitization replacing FHA and VA loans directly guaranteed by the government. This substitution holds within ZIP codes, properties, and borrower types. Furthermore, the two groups exhibit similar delinquency rates. These findings suggest that high-CLTV mortgages are a constant feature of the U.S. housing market and are used by similar borrowers over time, but that their source varies with the mortgage cycle